Petroyuan

Petroyuan[1][2] is a form of the official Chinese currency, the Yuan intended at least initially for oil trading.[3] On March 26, 2018, the Chinese government issued the first long term oil trading contracts denominated in Petroyuans.[4] This project exists to attempt to compete with the American petrodollar as a main currency in crude oil transactions, whose hegemony has led the market since the dollar standard was first established in 1971, replacing the gold standard and giving the US the power to manage most of the world's currency supply (around ~60%).

History

Since 1971, when President Richard Nixon ended the dollar convertibility to gold, many foreign currencies emerged trying to replicate the pre-1971 situation. An example of a petrocurrency backed by gold was a project by the Libyan dictator Muammar Gaddafi, who released a project to create a multinational African currency, However, this project was discarded because he was overthrown in the Civil war of Libya in October 2011.[5]

China, with a currency constantly growing on market relevance, attempted to create a dollar alternative. In June 2017, the People's Bank of China and the Central Bank of Russia signed a memorandum to facilitate the exchange of crude oil using Yuans. Months later, in September 2017, China made official the existence of the Petroyuan.

The operation was given on a context where China dominated crude oil importations, with approximately 400 million tons as of 2017 as stated by Sinopec, one of China's biggest oil companies.

Characteristics

One of the reasons the Petroyuan was created was that Russia, Venezuela and Iran may be able to avoid United States sanctions, so nations such as Saudi Arabia, one of the main oil producers and extractors could avoid dollar hegemony and US pressure. The Yuan's main problems are its volatile liquidity and short scale extension, however the Chinese government intervened increasing its gold reserves to back the Petroyuan.

See also

References
  1. "What Is The Petroyuan?". FXCM UK.
  2. "Petroyuán, con tilde" (in European Spanish). Fundeu. Retrieved 30 March 2018.
  3. Jegarajah, Sri (2017-10-24). "China has grand ambitions to dethrone the dollar. It may make a powerful move this year". CNBC. Retrieved 2021-04-27.
  4. "How China Is About to Shake Up the Oil Futures Market". Bloomberg.com. 2018-03-08. Retrieved 2021-04-27.
  5. "The Worrisome Deal: China and Saudi Arabia", Harvard Politics, 18 December 2018.
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