How to bypass the US dollar, as well as the petrodollar, has been discussed at BRICS summits for years now. Russia is now China’s largest crude oil supplier (1.32 million barrels a day last month, up 17.8% from a year earlier.) Moscow and Beijing have been forcefully bypassing the US dollar in bilateral trade. In October last year, China launched a payment system in both currencies – the yuan and the ruble. And that will apply to Russian oil bought by China.
The game will really start to change when other nations realize they have found a real credible alternative to the petrodollar, and switching to the yuan en masse will certainly spark a US dollar crisis.
What the petro-yuan may be able to provoke in the short term is an acceleration of the next crises in treasuries and bond markets, which will inevitably spill out in the form of a crisis in global currency markets.
Yet this is just the initial step in an ultra-high-stakes game. One should keep one’s eyes firmly focused on the interpolations between trade connectivity and technological breakthroughs. The petrodollar may be in danger but is far from finished.