- BRICS nations and parts of Europe are increasingly using local currencies for trade, particularly in energy deals.
- While 80% of global oil trades are settled in dollars, a significant 20% now use alternatives, a figure poised to grow.
- China is aggressively promoting the Petro-yuan, while India and Russia are also facilitating “non-use” of the dollar.
A geopolitical shift in global trade settlements is gaining momentum, as the BRICS bloc and European nations now favor local currencies over the U.S. dollar for bilateral agreements. This movement is most pronounced in the critical energy sector, where the petrodollar’s decades-long dominance is facing its first serious, structured challenge. However, the U.S. dollar remains overwhelmingly dominant, settling an estimated 80% of all oil transactions.
Consequently, the remaining 20% of oil trade payments, though smaller, represent a significant and growing wedge. Data from investment advisory firm Sowell Management indicates this portion is largely driven by BRICS and some European countries. This 20% share is expected to increase toward 25-30%, applying constant pressure on dollar hegemony.
Meanwhile, China is leading the charge by aggressively promoting the petro-yuan for oil purchases. Several transactions for oil, coal, and copper have already been completed using the Chinese currency. This strategic move aims to dim the lights on the petrodollar system that has underpinned global finance.
Similarly, fellow BRICS members India and Russia are promoting the ‘non-use’ of the dollar for energy payments. India has utilized a diverse payment set including yuan, rubles, rupees, and even UAE dirhams for its oil deals. The bloc, which controls nearly 40% of global oil production, is laying the groundwork for a potential tectonic shift in trade finance.
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