Fears of the petrodollar becoming phased out in favor of the petroyuan are amplifying.
France has completed the first trade of Liquefied Natural Gas (LNG) settled in yuan, according to the Shanghai Petroleum and Natural Gas Exchange, Reuters reported.
The deal was for 65,000 tons of LNG imported from the UAE by French company TotalEnergies, per Reuters.
While the dollar is the international world’s reserve currency, China has ambitions to dethrone the dollar and make the yuan a global currency, according to Barrons.
During a visit to Saudi Arabia in December, Chinese President Xi Jinping commented on his intentions to continue trade efforts with the Gulf Cooperation Council, a political and economic alliance of six Middle Eastern countries, including Saudi Arabia.
“China will continue to import large quantities of crude oil from GCC (Gulf Cooperation Council) countries, expand imports of liquefied natural gas, strengthen cooperation in upstream oil and gas development, engineering services, storage, transportation and refining, and make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade,” President Xi said, per Reuters.
Saudi Arabia, in turn, has taken a step toward joining the Shanghai Cooperation Organization (SCO) by approving a memorandum Wednesday to become a dialogue partner with the entity. This move was discussed during President Xi Jinping’s visit in December. The SCO is a political, economic, and security organization made up of Eurasian nations, including China, India, Russia, and others.
These partnerships have furthered speculation that the petrodollar system that came to fruition in the 1970s is weakening.
“The traditional monogamous relationship with the U.S. is now over,” Ali Shihabi, a Saudi analyst and writer, said, according to CNN. “And we have gone into a more open relationship; strong with the U.S. but equally strong with China, India, (the) UK, France and others.”
Still, the yuan accounts for only 2.7% of global trade, while the U.S. dollar makes up 41% of international trade, according to Zero Hedge.
Facing U.S. sanctions after its invasion of Ukraine, Russia is also embracing the yuan. It has become Putin’s most viable currency to reduce its exposure to the dollar and the euro, Zero Hedge reported.
