The BRICS alliance is reportedly considering a new “petroyuan” in its latest move to compete with the world dollar hegemony.
BRICS, which was originally launched as a coalition of Brazil, Russia, India, China and South Africa, has since welcomed several other countries into its union and is looking at taking its next steps at a summit in Kazan, Russia, next month.
In a new report, the Official Monetary and Financial Institutions Forum (OMFIF) think tank says that BRICS countries will be discussing how to implement an alternative to the current dollar-based oil payments system – potentially using the Chinese yuan.
Saudi Arabia, the world’s largest supplier of oil, has recently confirmed that it is “open to new ideas” when it comes to oil trade, including using the yuan.
Russia is also looking at using the petroyuan as an alternative to the petrodollar to reduce its dependence on the US and the SWIFT system, which banned Russian banks in February 2022 as a response to the conflict in Ukraine.
The OMFIF says fully implementing a petroyuan system would, in theory, be difficult for countries to operate under as surplus yuan can essentially only be spent on trade with China or simply placed in foreign reserves. BRICS financial intermediaries would then have to recycle the surpluses to other countries in need.
“The main beneficiaries of the renminbi’s greater role will be Chinese banks, making badly needed profits out of the recycling process. Western financial intermediaries can join them by arbitraging between the dollar-denominated oil market and the renminbi-denominated oil market. However, the introduction of a petroyuan will only further the fragmentation of the global financial system.”
As for the political implications of ditching the dollar for oil trade, Bandar Al-khorayef, the Saudi minister of industry and mineral resources, recently said the country was not interested in mixing politics with commerce.
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SOURCE: www.dailyhodl.com
RELATED: BRICS: Russia Puts China in Great Difficulty!
Published October 5, 2024
The Russian economy is increasingly turning towards China, particularly through the massive adoption of the yuan for its international trade exchanges. This significant dependency on the Chinese currency, a direct consequence of Russia’s exclusion from the global financial system, raises more interest from Beijing, which seeks to strengthen its global influence and avoid Western reprisals.
The Russian economic dependence on the yuan
Since the intensification of international sanctions against Russia, the yuan has become the most traded foreign currency in the country. Moscow, excluded from Western financial systems such as SWIFT, has had no choice but to strengthen its commercial partnerships with China, which causes increased dependency on the yuan. Russia has become extremely reliant on the yuan, a situation that could become dangerous for its economy if the flows of this currency were to dry up.
This dependency is exacerbated by the caution of Chinese financial institutions. Faced with Western sanctions, major Chinese banks hesitate to engage further with Russian entities, fearing to face sanctions themselves. This situation creates economic instability for Russia, which could see one of its main financial lifelines shrink. For Russia, this growing dependence on the yuan is not without consequence, as it exposes the country to additional risks, particularly in terms of the stability of its monetary reserves and its trade balance.
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SOURCE: www.cointribune.com
