The politics of global oil are developing economic and political alliances. These are similar to those that existed during the Cold War. The Petro-bloc is highly political, and all countries involved in it are making continuous attempts to exert influence on each other. But in recent years, there has been a growing agreement that the dominance of the United States is diminishing to such a degree that the international system is transitioning from a unipolar global order to a multipolar order. The weakening of the petrodollar as a currency might perhaps be an indication that this shift is now taking place.

The term “petrodollar” refers to the preponderant position of the United States dollar. The US dollar serves as the reserve currency for international oil transactions. The fact that nations that export oil get compensated in US dollars for such exports has contributed to an increase in both the value of the currency and the demand for it around the globe. A worldwide Petro-bloc has been controlled by Russia, China, the United States of America, and the Middle East. Outside of the United States and Russia, oil companies such as Chevron, Shell, Exxon-Mobil, BP, Texaco, and Gulf Oil hold 88% of the world’s oil reserves. Due to multiple uncertainties in global politics, there has been a significant change in the geopolitical preferences of oil-exporting nations and oil-importing countries. But these geopolitical calculations would pose a danger to petrodollars in the short and long term. But this sudden shift in petropolitics has lately come to the forefront as a result of two key events. Firstly, the Russian war on Ukraine led to restrictions on imports of Russian oil. Secondly, the United States’ insistence on boosting oil output after the war was met with opposition from Saudi Arabia-dominated OPEC. This development is not unexpected given that the West, led by the United States, has imposed sanctions that have made it harder for Russia to export gas and oil. But the Middle Eastern countries did not comply with the demand of western nations, as it would further put OPEC’s own petrodollar business in danger. Also, Middle Eastern governments did not want to artificially drive down oil prices, so they kept production levels low and did not increase their output.

In global politics, China’s influence is expanding considerably among MENA nations. China has been making efforts to lessen its dependence on US dollars for importing commodities and to contest the dominance of the petrodollar. China has been in discussions with several OPEC members, including Saudi Arabia, Iran, and Venezuela, over the possibility of pricing some of those countries’ oil sales in yuan rather than in dollars. This may have repercussions for the international energy market as well as for ties between the United States and China. OPEC and its allies are moving in the opposite direction from the present American strategy, which is to advocate for a significant fall in oil prices. Additionally, Mohammed Al-Jadaan, the finance minister of Saudi Arabia, stated in January 2023 at the World Economic Forum in Davos that there were no issues settling trade arrangements, whether in the US dollar, the euro, or the Saudi riyal. Although they have not yet done so, the Saudis appear to be considering alternatives based on recent actions. In 2022, Saudi Arabia said that it was investigating the possibility of engaging in yuan-based oil trade with China. Further, other Asian nations, including India, Pakistan, Iraq, and the United Arab Emirates, have all reached agreements with China and Russia to pay for oil using the ruble. The BRICS countries of Brazil, India, China, and Russia had begun discussions on trading oil for their common currency. Several nations were doing research to determine the potential benefits and drawbacks of exchanging oil for other currencies. The most recent challenge to the petrodollar was NORD Stream 2, which Germany transacted in euros. This would have signaled the beginning of the Petro-Euro exchange even during the Russia-Ukraine war. Even when the war was ongoing, Russia demanded that the European Union pay for oil and gas in rubles. Other nations that were purchasing oil, including India and China, were also avoiding the use of the dollar for the time being and going with other currencies instead. Even OPEC nations had shown willingness for the euro to coexist alongside the petrodollar. The Saudis were in charge of this initiative, but the United States put an end to it. This change in strategic objectives for Saudi Arabia offered a possibly imminent challenge to the strategic interests of the United States. This transition would be amplified if Saudi Arabia decided to distance itself from the petrodollar. That alone will not be enough to bring the dollar to its lowest point, but it will be enough to further endanger the hierarchy of the US dollar in the global economy. In addition, ignoring the status of the petrodollar is particularly reckless due to the fact that the petrodollar’s position has ramifications for international politics. In such circumstances, Saudi Arabia is attempting to maintain equilibrium in its ties with both the United States and China. While the petrodollar is not going away, it is facing some stiff competition in 2023. After 40 years of American monopoly in Petrodollar, China is now a significant threat to the petrodollar’s dominance.

The petrodollar does not appear to be as stable as it once was in 2023, and the US may need to reaffirm its position in light of recent changes. It can be argued that there have been a number of noteworthy signs pointing to a potential shift away from the dollar and toward other currencies, especially in light of the apparent policy changes. On the other hand, if the petrodollar’s value were to fall, this might indicate a shift away from a monopolar financial system and toward a more multipolar one. However, a number of countries have agreed to trade oil instead of using the dollar in exchange for other currencies. The dollar’s value actually fell significantly as a result of a change in the way that it was used in international oil trade.

The sudden change in currency that would occur for the trade of oil commodities would not take place all at once. Because states are used to doing business in dollars, it is possible that they would not be eager to alter whole economic strategy in order to account for a new currency. This new currency may be a supplement or entirely replace their current trade systems. Despite the ongoing problems, it is possible that countries in the Middle East, and Saudi Arabia in particular, may not be interested in this currency change because it will not be beneficial to their economies. However, the possibility of using a different currency is undeniably there, and much will depend on the manner in which China intends to integrate Yuan into the international economy. It is conceivable that Saudi Arabia could play a significant role in the petrodollar system as well. A domino effect with the rest of OPEC may occur if Saudi Arabia starts trading oil for Yuan. So, this internal struggle is further helping China in the long run by enabling it to increase its influence in oil markets and perhaps establishing the yuan as a significant oil trading currency. Even if this pattern continues, there is no way that there will be less demand for the dollar. As long as there is a surplus of debt denominated in dollars in the world economy, there will be a need for dollars. At the very least, this will ensure that the demand for dollars will remain constant. In addition, the dollar continues to be one of the most secure currencies to have on hand, particularly in the central banks of China, Japan, the European Union, and the United Kingdom.

In conclusion it can be added that the weakening of the petrodollar may have important strategic repercussions, especially in regard to the overall distribution of power throughout the globe. The United States dollar’s status as the world’s reserve currency has given it a preeminent position within the global monetary system, which in turn has provided the United States with tremendous geopolitical power. In the longer run, oil production may not render the petrodollar system obsolete as a result of this sudden shift. It is possible that this will catalyse a move away from the dollar toward a global monetary system that is more decentralized.

Disclaimer. The views and opinions expressed in this analysis are those of the authors and do not necessarily reflect the official policy or position of MEPEI. Any content provided by our authors is of their opinion and is not intended to malign any religion, ethnic group, club, organization, company, individual, or anyone or anything.

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About the author:

Aishwarya Sanjukta Roy Proma

She is a research intern at the KRF Center for Bangladesh and Global Affairs. Previously, she worked at the East Asia Study Center. She is a research analyst in security studies. She obtained her Master's and Bachelor's degrees in International Relations from the University of Dhaka, Bangladesh. She can be reached at

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