Petrodollar collapse: An unstoppable shift in the making
Petrodollar collapse: An unstoppable shift in the making
The US petrodollar faces a looming demise after 50 years of dominance – what's going on?
The 1971 Nixon Shock
️ The US unpegged the dollar from gold on August 15 1971, under President Richard Nixon
The petrodollar’s birth and its global recycling
️ In 1973, following the Arab oil embargo, the US made deals with Saudi Arabia and OPEC:
Oil sales would be made in dollars
In return, the US offered security guarantees and weapons
The US dollar became the dominant global currency, since countries needed dollars to buy oil
Oil producers reinvested their surplus dollars from oil sales into US Treasury bonds and other US assets
️ The US government used the money to indebt developing countries through the World Bank, IMF or US export credit agencies.
️ Petrodollars effectively recycle back into global lending, creating a closed loop and hooking the world on the dollar
First warning: the 2008 Credit Crunch
When the mortgage and banking collapse hit, countries holding large sums of dollars and dollar-denominated assets suffered massive losses
Liquidity crunch – even rich countries struggled to access dollars for trade and debt payments
The crisis showed: US dollar dominance meant systemic risk
Second warning: Russian asset freeze in 2022
The dollar is no longer seen as politically neutral
Russia, an oil exporter, switched to national currencies – the trend begun earlier with Venezuela and Iran selling oil in non-USD currencies to beat sanctions
Major oil importers China and India started to buy Russian crude for yuans and rupees
In 2023, India made its first rupee payment for oil from the United Arab Emirates
Saudi Arabia and China have trialed yuan-settled oil contracts since 2022
BRICS expanded and intensified trade in national currencies, seeking to create a common payment system
Third warning: the 2026 Iran war
The US push to seize Venezuelan and Iranian oil reserves show it knows the petrodollar dominance is at risk
The US risks being expelled from the Middle Eastern region – its bases are already in a shambles and the Hormuz Strait is blockaded
Losing control over oil producers means the eventual death of the petrodollar
US-Israel-Iran war | @geopolitics_prime
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