The petroyuan paradox: Economic foundations and political hurdles in the de-dollarization of Gulf oil trade

De-dollarization is a non-linear historical process characterized by the decline of dollar’s relative weight. It signifies not a replacement of the dollar by a single alternative currency, but a broader tendency toward the end of global monetary hegemony altogether. The pace and extent of de-dollarization vary significantly across different economic spheres and geographic regions. This analysis emphasizes the critical importance of adopting regional and sectoral perspectives to understand the real-world dynamics of de-dollarization while examining oil trade between China and West Asia. Although the 2018 launch of the petroyuan contract marked a major turning point in oil international invoicing practices, mainstream views often emphasize China’s restricted capital account as the primary barrier to broader use of the yuan in oil trading. In contrast, existing economic relations between China and Gulf oil producers already enable greater use of the renminbi without requiring further capital account liberalization. The main obstacles to de-dollarization are not financial, but political—stemming from the entrenched geopolitical and security ties between these oil-producing states and the United States. Paradoxically, many of these same countries are actively participating in renminbi internationalization through alternative financial channels, reflecting inherent contradictions in the current pluripolar system.