Finshots Daily Is it time to write the petrodollar’s obituary?
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Mar 30, 2026 A look at the origins of dollar‑priced oil and the 1970s deal that set the system. Discussion of sanctions, Russia’s and others’ moves to non‑dollar payment systems. Analysis of why Gulf states might diversify away from dollar pricing. Examination of China’s tools to promote yuan‑priced oil and the limits of yuan convertibility. Argument that markets may fragment rather than see a full replacement.
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How The Petrodollar Was Born
- The petrodollar began with 1970s informal deals where Saudi sold oil for US dollars in exchange for US military protection.
- Gulf states then used surplus dollars to buy US assets, recycling oil revenues into US government bonds and stabilising their currencies.
Sanctions Triggered A Payment System Shift
- Sanctions after Russia's 2022 invasion exposed the petrodollar's vulnerability when Western powers froze dollar reserves and cut Russia off SWIFT.
- Russia pivoted to SPFS and China's CIPS while accepting yuan and rubles for energy, starting a real shift away from dollar reliance.
Security Doubts Can Undermine Dollar Dominance
- Deutsche Bank warns the US‑Israel war with Iran could accelerate a move from the petrodollar to the petroyuan as Gulf states question US security guarantees.
- If the US won't protect Gulf oil assets, those states reassess the dollar-for-security bargain and consider diversification.