Russia _has_ to use the yuan but that’s a far cry from “everyone”.

China just paid for their first boat of yuan settled LG on the open market 20 days ago. After 6 years of offering it on their exchange. Their meeting with the Saudi’s last month came with non-committal statements, again, 6 years after they first started.

I think the yuan becoming more involved in the energy trade is inevitable, they are the largest energy importer in the world and a major economy. It may have even been accelerated by the sanctions on Iran and Russia. But to say that “no one is paying for oil in dollars anymore” is a ludicrous statement (probably one that comes from the posters hopes not the facts).

And adding the petroyuan to the mix is more dangerous to the Chinese currency than to the dollar. It immediately becomes imminently arbitrage-able in ways it can’t be currently due to currency controls. The Chinese government has been de-liberalizing their currency because they are worried what the markets will do to it.

That’s not to mention their treasury exposure, trade surpluses and the Middle Eastern states currency pegs.

A de-dollarization of the energy market will make it less efficient and may cause some rebalancing of currency reserves, but it will drive all settlement currencies to free market parity which is good for western currencies and bad for Chinese and Russian ones.

I agree that "no one is paying for oil in dollars anymore" is an overblown statement. However, the de-dollarization process was started in 2014 and will keep getting stronger. This matches the recent leaks (as well as the video confirmation by François Hollande - the former President of France), that the 2014 coup in Ukraine was staged and sponsored by the US. As a Ukrainian, I tend to believe that a good portion of the conflict between Russia and Ukraine is driven by the de-dollarization fears of the US. The global superpower country is basically losing its main leverage, which is, in my personal opinion, a huge deal.

While the mainstream media keeps it all super positive, I think the US did a lot of miscalculations within the past several years. And honestly, something tells me that Putin will outplay them all. The guy is extremely smart and it's foolish to downplay him and say he is not. We shall see.

I’m not going to comment on your other opinions as I don’t have relevant experience. But de-dollarization was a common refrain in my field (finance) going back to before I was involved in it (2001).

I’ve seen everything from Nixon in China to the current Russian sanctions being used as reasons for it. I suspect the real reason it will happen is that people can make more money trading in yuan (or rupee) than in usd. Sadly, Russia and Ukraine just aren’t important enough to make a dent.

My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons. It spends all over the world. It isn’t debased frequently and it isn’t volatile.

China could introduce a currency that had all those properties tomorrow. That they haven’t is an indictment of using the yuan as a reserve currency. It would take a significant change to Chinese economics to make that true.

But! If China did that it wouldn’t save Russia. Modern currencies hate autocracy and despotism because it runs counter to their premise. It doesn’t help Russia for China to liberalize, the only thing that helps them is their own liberalization.

Thanks for the common sense response.

> My personal opinion is that the dollar is the reserve currency (and thus the petro currency) is due to much less conspiratorial reasons.

Agreed. There is zero conspiracy around that, which is why I believe the US loosing the natural power of the Dollar is a logical fear.

> It would take a significant change to Chinese economics to make that true.

..which is what BRICS aiming for? If that is one of their goals, nothing is going to stop them. And honestly, that's a good goal to have. Putting all the negative narrative around Russia/China aside and abstracting away from the US, why should a single country's currency dominate over the entire world? That's simply not fair.

> If China did that it wouldn’t save Russia

I somewhat disagree. Russia is not looking to be saved by anyone. Putin's interest is a mutually beneficial partnership. He's a businessman. He's cool with yuan (or any other currency) being the new reserve currency. On the other hand, he is not cool with the US pushing to be the superpower dictating the rules, which obviously goes against the United States' goals and ambitions. I could be wrong, but that's my understanding of things.

BRICS is not some counter balance to the US petro dollar. It is at best a coffee claque of countries with the most currency controls of any major economies and at worse a Chinese op to make the yuan more powerful. But the problem is that none of the BRICS nations want a market currency! They want a less dominant USD (which I personally think is understandable but short sighted) but they haven’t offered a viable alternative.

That is to say they each want their own currency to be as valuable as USD but haven’t done the things it would take to make that happen.

I don’t think it is “fair” that the USD is dominant but I think that oil settlement in other currencies is much less detrimental to USD than many people think. Again, if you can settle oil in your currency, you’ve effectively put it in competition with USD. The Chinese government has been fighting that outcome for as long as there has been modern Chinese currency, and frankly every other currency besides INR doesn’t matter for this conversation and INR also has been very controlled.

People seem to have it backwards. Global trade attaches to liberal currencies because that’s good for global trade. The US has the most liberal currency of all time (and the most liberal currency currently even with Russian sanctions) and that makes it the petro currency. If the yuan or the rupee liberalize enough to take over the petro trade then there won’t be much impact on usd but if they don’t then market forces will hurt them more than the US.

The thing that might cause a USD fall is a default on usd debt or the us becoming more conservative on their currency controls but there is so far to go on that compared to their comps it’s hard to extrapolate.

I don’t have opinions on Putins desires, it’s outside of my understanding. But picking the Chinese in a relationship where they have more powers than the previous relationship with Europe seems crazy to me. But international politics is not my sphere.

Appreciate your comments, Kasey, and thanks for the detailed response.

Off-topic: the link in your profile is no longer available.