A multipolar world and a new financial architecture
A multipolar world and a new financial architecture
By Serhat Latifoğlu
US President Roosevelt and Saudi King Abdulaziz laid the foundations of the petrodollar system on February 14, 1945, during their meeting aboard the USS Quincy. It was based on a very powerful formula: oil and dollars in exchange for security. The US would provide military guarantees to the Gulf countries; in return, oil trade would be done exclusively in dollars. This agreement fundamentally transformed not only the energy markets but the entire global financial architecture.
When Nixon ended the dollar’s convertibility to gold in 1971, the Bretton Woods system collapsed. However, the petrodollar system managed to sustain US global financial hegemony. The pricing of oil in dollars condemned countries in every corner of the world to the dollar. The redirection of petrodollar revenues earned by Gulf capital since 1975 into US Treasury bonds and Wall Street closed this loop and made the system sustainable. This structure which economists refer to as “exorbitant privilege” has been the invisible yet most critical pillar of American hegemony. Today, this structure is crumbling under three major, simultaneous, and interconnected fractures.
The first blow: Sanctions on Russia
The Russia-Ukraine war paved the way for the most comprehensive embargoes in history imposed on Russia. Tens of thousands of sanctions attempted to block Russia’s energy trade. However, Russia succeeded in maintaining energy trade with numerous countries, primarily China and India, effectively circumventing the imposed embargo.
The figures show this strikingly: In 2024, the total trade volume between Russia and China reached $244.8 billion, and Russian oil, gas, and coal accounted for approximately $130 billion of this trade. This entire massive trade volume was done with the two countries’ own national currencies. Relations between Russia and India have gained similar momentum: the trade volume has increased nearly sevenfold over the last five years, and India has become one of Russia’s top three foreign trade partners. Moreover, the share of national currencies in this trade has exceeded 90%.
These alternative trade networks of Russia with BRICS countries and neighboring states carry a meaning that goes far beyond rendering the embargo dysfunctional. This process proves that a tangible and measurable blow has been dealt to the petrodollar system: the world’s largest energy exporter is now able to conduct colossal trade volumes without the dollar.
The second blow: The Petroyuan agreement
The second blow in the unraveling of the petrodollar system is coming from the petroyuan arrangement between Saudi Arabia and China. The statement from Riyadh, the very birthplace of the petrodollar system, declaring, “We will cooperate on accepting yuan for our oil sales to China” has effectively undermined the system. This was not merely a routine commercial preference, but the harbinger of a geopolitical fracture.
Saudi Arabia’s participation in the digital currency project named “mBridge” during the same period reveals just how structural this fracture truly is. By completely bypassing the SWIFT infrastructure, and thus US oversight, mBridge offers the possibility of instantaneous payments between the central banks of China, Hong Kong, the UAE, Thailand, and Saudi Arabia.
The final blow: The Strait of Hormoz
Iran’s closure of the Strait of Hormuz and its strategic impact is the third, and perhaps most lethal, blow to the petrodollar system. Control over this maritime corridor, through which approximately one-fifth of the world’s oil trade passes, directly determines global energy prices and the demand for dollars.
In the past, US influence over this strategic passage was the geographical bastion of the petrodollar system. Recent developments have fundamentally transformed this balance. Even during periods when the Strait was only partially closed, the yuan and national currencies were brought into play. The most critical point is this: even if the Strait becomes fully operational again, payment habits will have already shifted. The economic and political incentives for a return to the old ways are no longer as strong as they once were. Since the possibility of a “dollar-free oil trade” has occurred, a specific reason would be required for a return to the dollar
The fact that the US’s role in the Gulf security architecture is being called into question has seriously undermined the credibility of the “security guarantee” made 80 years ago. The “security for dollars” formula, the very foundation of the historic consensus reached aboard a ship in the Red Sea, is now being shaken at both of its pillars simultaneously: the security guarantee is fracturing, and the dependence on the dollar is being eroded through alternative channels.
A multipolar world and a new financial architecture
To correctly grasp the ongoing transformation, one point must be emphasized: the petrodollar system has effectively come to an end. The power of the petrodollar was thanks to its monopoly status. Countries that attempted to “violate” this monopoly faced heavy consequences. (Iraq’s attempt to price its oil in euros and Libya’s gold dinar project). Now, this monopoly is broken, and once a monopoly is shattered, it can never be restored with its former strength.
With the collapse of the monopoly, the petrodollar will step by step be supplanted by the petroyuan and various alternative models. To be sure, oil trade in dollars will continue, however this will increasingly be restricted to trade with the US and countries with a high dependency on the dollar. The circulation of national currencies and yuan will gain momentum, and the currency composition of global energy trade will be diversified permanently.
There are still obstacles to the petroyuan fully replacing the petrodollar: insufficient yuan liquidity, deep financial markets, and the liberalization of the capital account are prominent among them. However, these have become far more surmountable compared to the past. SWAP agreements, alternative payment infrastructures like mBridge, and the institutional framework of BRICS are paving the way for the petroyuan more and more every day.
Türkiye’s position and strategic opportunities
Türkiye holds a strategic position right at the heart of this great transformation. As both a member of the Western alliance system and a country with deepening relations with BRICS, Türkiye can best capitalize on the opportunities offered by the new multipolar order. Taking advantage of these opportunities demands certain structural prerequisites.
First and foremost, it is necessary to abandon neoliberal economic policies and turn to a production-oriented economic transformation. Benefiting from the dollar-free trade networks necessitates a strong industrial base and negotiating leverage in foreign trade. Currency swap agreements that promote the use of the Turkish Lira in regional trade can be utilized as the financial instruments of this transformation.
In this context, the discussions of joining BRICS are not merely a matter of political preference. In an era where the de-dollarization process is gaining momentum and trade in national currencies is becoming widespread, the institutional access and market breadth offered by the BRICS can translate into tangible economic gains for Türkiye.
The capacity to run independent economic policies is the most critical variable that will determine whether Türkiye emerges as a winner rather than a loser of this transformation.