The Gulf States and the Petroyuan

Abstract

The introduction of the petroyuan has caused a significant shift in the global energy market today. As a result, the new financial system will appear in a new crude pricing benchmark based in Asia, known as the Shanghai International Energy Exchange. The IMF added Chinese currency, Yuan, as a global currency in 2016, which has created an opportunity for China. Despite being the new-coming petrocurrency to challenge the petrodollar, the petroyuan has a significant potential to influence international trade not only because of its GDP but also because of its influence on developing economies. Taking advantage of the US sanctions, this has made the emergence of the petroyuan a sign of relief for countries, for example, Russia or Iran to be able to trade without using the US dollar. The GCC states are among the biggest suppliers of crude oil to China. Moreover, with the Look East policy, the GCC has made such significant moves towards the petroyuan. Therefore, the petrodollar and the petroyuan would become a case of an economic curtain for the GCC states. For that reason, it would need to adjust to the market by embracing or considering to adopt the petroyuan as an alternative. This paper discusses the importance of the petroyuan, the role of China as a non-regional player.