BRICS Eyes Petroyuan to Challenge Dollar Dominance

According to reports, the BRICS alliance is looking at creating a “petroyuan” as a substitute for the US dollar in international oil commerce. BRICS—Brazil, Russia, India, China, and South Africa—was founded in the beginning and has since grown. It is getting ready to consider its next strategic moves at a conference in Kazan, Russia.

According to a recent study by the Official Monetary and Financial Institutions Forum (OMFIF), the BRICS countries are exploring methods to transition from an oil payments system that is based on dollars to one that is based on the Chinese yuan. This conversation is a reflection of BRICS’ continuous attempts to find new financial independence paths and lessen reliance on the US dollar.

Saudi Arabia, the world’s largest oil producer, has expressed openness to alternative payment methods, including the use of yuan. Russia, in particular, sees the petroyuan as a way to bypass the U.S. dollar and the SWIFT system, from which its banks were banned following the conflict in Ukraine.

Challenges and Implications

While the concept of a petroyuan sounds promising for reducing reliance on the dollar, implementing such a system may present challenges. The OMFIF points out that surplus yuan from oil trades can primarily be used for transactions with China or stored in foreign reserves. BRICS financial intermediaries would need to redistribute these surpluses to other nations, complicating the process.

“The main beneficiaries of the renminbi’s greater role will be Chinese banks, making badly needed profits out of the recycling process,” says the OMFIF. However, this could further divide the global financial system.

Politically, Saudi Arabia has been cautious. Bandar Al-khorayef, the Saudi minister of industry and mineral resources, emphasized that Saudi Arabia does not wish to mix politics with commerce: “The petroyuan is not substantial to [the ministry], we believe Saudi Arabia will do what’s in its best interest.”

The BRICS alliance continues to explore new strategies, including developing a gold-backed currency to facilitate trade among member nations.