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PetroDollar Vs PetroYuan
vs
What is the Petrodollar system?
1. The Petrodollar system of oil payments was setup in the year 1974 by the USA
& the Kingdom of Saudi Arabia.
2. The system was put in place in order to arrest the slide in the value of the US
Dollar after the US Govt pulled out of the Bretton Woods agreement in 1970.
3. The system ensured that the US Dollar would be the only currency acceptable
to all OPEC countries for their Oil Sales Contracts.
Why was the Petrodollar system successful?
• The US was the largest importer of oil at the time.
• The US provided security and stability to middle
eastern countries.
Perks enjoyed with the PetroDollar system!
• The US Dollar would be the reserve currency of the World as all the
Dollars earned by OPEC countries would be invested in US assets and
securities.
• It was a successful system that ensured the global dominance of the
US economy and the US Dollar.
USA dependency on imported oil has
decreased
• The US has been able to extract & refine Shale oil (from rocks),
which has reduced its dependence on imported oil.
• This has led to a lower US demand for imported oil and thus,
lower oil prices in the global markets.
A new day begins in the east &
it begins with the PetroYuan
1. With the rapid expansion of the Chinese economy, China is now the largest
importer of oil.
2. In order to manufacture a large number of goods, the Chinese need raw
materials, with oil being the most important one.
3. For China, being able to buy oil or any other commodity in Yuan will
definitely be easier than buying it in US Dollars.
4. Petroyuans can help the Yuan replace the US Dollar as a global reserve
currency and announce China's arrival as the largest economy of the World.
How will China achieve this position?
1. China is trying to convince the Kingdom of Saudi Arabia to use the
PetroYuan instead of the PetroDollar.
2. Saudi Arabia is the largest oil exporter in the World and any change
in the Saudi position will easily result in all the other OPEC
countries following suit.
OPEC Countries are supporting China,
but why?
1. Oil exporting countries like Russia, Iran and Venezuela have been under heavy US sanctions
which do not allow them to trade in USDs easily. They are using Yuans for trading with China.
2. These 3 countries are major oil exporters and oil exports are a major source of income for them
but the US Dollar's monopoly has hurt their economies a lot.
3. Other OPEC countries like Algeria, Libya, Iraq, etc. depend heavily on China for extracting oil and
developing their infrastructure such as ports and SEZs.
4. Algeria uses the Yuan to trade with China, instead of the US Dollar.
Benefits of trading in Yuan!
1. China recently inaugurated the Shanghai International Energy Exchange,
where organizations can purchase or sell oil in Yuan denominated
contracts.
2. Yuan contracts are linked to Gold, thus allowing traders to convert their
Yuan to Gold, whenever needed.
3. Objective of this exchange is to make the Yuan a much more acceptable
Chinese efforts in replacing PetroDollar
1. China is also lobbying hard with Saudi Arabia to ensure that the Yuan
replaces the US Dollar in Oil Sale Contracts.
2. Saudi Arabia is in a tough spot as it cannot be the only OPEC country that
does not accept Yuan.
3. OPEC countries like Libya, Algeria, Kuwait, UAE, Iraq, Russia, Iran and
Venezuela depend heavily on China for their infrastructure and economic
needs.
4. It’s only a matter of time before the PetroDollar is replaced by the
Petrodollar vs Petroyuan

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Petrodollar vs Petroyuan

  • 2. What is the Petrodollar system? 1. The Petrodollar system of oil payments was setup in the year 1974 by the USA & the Kingdom of Saudi Arabia. 2. The system was put in place in order to arrest the slide in the value of the US Dollar after the US Govt pulled out of the Bretton Woods agreement in 1970. 3. The system ensured that the US Dollar would be the only currency acceptable to all OPEC countries for their Oil Sales Contracts.
  • 3. Why was the Petrodollar system successful? • The US was the largest importer of oil at the time. • The US provided security and stability to middle eastern countries.
  • 4. Perks enjoyed with the PetroDollar system! • The US Dollar would be the reserve currency of the World as all the Dollars earned by OPEC countries would be invested in US assets and securities. • It was a successful system that ensured the global dominance of the US economy and the US Dollar.
  • 5. USA dependency on imported oil has decreased • The US has been able to extract & refine Shale oil (from rocks), which has reduced its dependence on imported oil. • This has led to a lower US demand for imported oil and thus, lower oil prices in the global markets.
  • 6. A new day begins in the east & it begins with the PetroYuan 1. With the rapid expansion of the Chinese economy, China is now the largest importer of oil. 2. In order to manufacture a large number of goods, the Chinese need raw materials, with oil being the most important one. 3. For China, being able to buy oil or any other commodity in Yuan will definitely be easier than buying it in US Dollars. 4. Petroyuans can help the Yuan replace the US Dollar as a global reserve currency and announce China's arrival as the largest economy of the World.
  • 7. How will China achieve this position? 1. China is trying to convince the Kingdom of Saudi Arabia to use the PetroYuan instead of the PetroDollar. 2. Saudi Arabia is the largest oil exporter in the World and any change in the Saudi position will easily result in all the other OPEC countries following suit.
  • 8. OPEC Countries are supporting China, but why? 1. Oil exporting countries like Russia, Iran and Venezuela have been under heavy US sanctions which do not allow them to trade in USDs easily. They are using Yuans for trading with China. 2. These 3 countries are major oil exporters and oil exports are a major source of income for them but the US Dollar's monopoly has hurt their economies a lot. 3. Other OPEC countries like Algeria, Libya, Iraq, etc. depend heavily on China for extracting oil and developing their infrastructure such as ports and SEZs. 4. Algeria uses the Yuan to trade with China, instead of the US Dollar.
  • 9. Benefits of trading in Yuan! 1. China recently inaugurated the Shanghai International Energy Exchange, where organizations can purchase or sell oil in Yuan denominated contracts. 2. Yuan contracts are linked to Gold, thus allowing traders to convert their Yuan to Gold, whenever needed. 3. Objective of this exchange is to make the Yuan a much more acceptable
  • 10. Chinese efforts in replacing PetroDollar 1. China is also lobbying hard with Saudi Arabia to ensure that the Yuan replaces the US Dollar in Oil Sale Contracts. 2. Saudi Arabia is in a tough spot as it cannot be the only OPEC country that does not accept Yuan. 3. OPEC countries like Libya, Algeria, Kuwait, UAE, Iraq, Russia, Iran and Venezuela depend heavily on China for their infrastructure and economic needs. 4. It’s only a matter of time before the PetroDollar is replaced by the