Henry Kissinger travelled to Riyadh (Saudi Arabia) in 1974 to present a proposal to the Saudi royal family that might alleviate the financial problems arising from the oil crisis, the Vietnam War and the abandonment of the gold standard, in order to prevent a significant loss of its economic power and influence worldwide.
The deal with the House of Saud was this: in exchange for advanced military equipment and training, along with security guarantees, Saudi Arabia would use U.S. dollars exclusively for oil pricing and sales[1]. Other OPEC countries followed suit by 1975, even though they didn’t get the same deal as Saudi Arabia.
Since virtually everyone in the world imported oil from the OPEC, everyone in the world now needed dollars. This restored the demand for the dollar in foreign exchange markets.
This reinforced the dollar’s dominance as global reserve currency. The dollar was no longer backed by gold, but by black gold standard.
From that point on, the world had to get hold of dollars in order to buy oil. The easiest way to hold dollars was to buy US government debt. This paved the way, in the decades that followed, for the creation of a global financial system dependent on US interests.
Changing world
Thanks to the petrodollar, the US has created a system of geopolitical control unprecedented in history.
Although dollars are now created primarily within the private financial system rather than through the Federal Reserve, the system linking the dollar to the oil trade maintains a framework of geopolitical control. The world has been in demand for dollars for decades because it needs them to buy oil, which gives the US financial system considerable leverage, whether through sanctions in the case that the transactions pass through New York correspondent banks (the CHIPS clearing system) or through private-sector mechanisms. This has been the main framework of the system for 50 years, but recently something has changed.
The change began with the rise of the so-called Global South on the geopolitical stage, at the same time as the control mechanisms linked to the dollar were becoming an excessively tight straitjacket for their national sovereignties. In this regard, we see two key trends towards liberation: trading oil in currencies other than the dollar and withdrawing from the SWIFT payment system.
It was not the first move, but it was certainly one of the most significant: Saudi Arabia decided not to renew this petrodollar agreement when it expired on June 9, 2024. This allowed Saudi Arabia to start selling oil in currencies other than just the US dollar, potentially weakening the dollar’s dominance if this marks the first step towards creating a system to replace the market that the dollar has been propping up.
The creation of BRICS as a forum for collaboration among countries of the Global South represents a symbolic and practical counterweight to US dominance, as demonstrated by its new payment system. By seeking to bypass the US-controlled SWIFT payment system, these countries also avoid the growing economic sanctions imposed on nations that do not align with US interests.
Although BRICS Pay is still evolving and not yet fully operational, it is part of a broader strategic effort to reduce reliance on the U.S. dollar, strengthen financial sovereignty, and create an alternative global payment infrastructure outside Western-controlled systems[2].
Geopolitics in full speed mode
In recent years, and particularly in recent months, the US has made a number of moves that can be understood as an attempt to maintain its dominance over the energy market whilst preserving the dollar’s international role and reducing the risks of its gradual loss of reserve currency status. This strategy rests on a triple form of control:
- Control over oil fields.
- Control over the routes of physical flows.
- Control over the financial flows generated by the fossil fuel industry.
In reality, the current US approach does not differ greatly from the historical ‘petrodollar system’. The first two moves of control concern the physical aspect of the ‘petrodollar concept’, whilst the third belongs to its monetary dimension.
However, perhaps what is new in this case lies, on the one hand, in the degree of aggressiveness displayed – something new for our generation – and, on the other hand, in some of the specific tactics employed, such as those aimed at controlling transit routes.
Regarding the latter, it is worth noting that this could jeopardise freedom of navigation on the seas, a principle largely guaranteed by the US Navy, and taken for granted in the global economic system for many decades.
Control over oil fields
The origins of the petrodollar helped the US exert influence over a large proportion of the oil fields in Western Asia. The subsequent establishment in 1981 of the Gulf Cooperation Council (GCC) amongst the countries of the Persian Gulf – Saudi Arabia, Kuwait, Bahrein, UAE, Qatar, Oman- further strengthened US influence in the region, which boasts the highest concentration of fossil fuel resources. Here, the US administration has repeatedly intervened: it has waged two wars in Iraq in recent decades; in Iran, it installed the Shah in the mid-20th century, instigated the war led by Saddam Hussein’s Iraq against Iran in the 1980s following the Islamic Revolution, has imposed economic sanctions on the country for years, and has recently attacked it alongside Israel with the permission of most GCC members.
Last year, the US initiated a blockade against Venezuela, the country with the largest proven oil reserves. In early 2026, it carried out an invasion of the country, kidnapping its president with the stated intention of controlling Venezuela´s oil industry.
Control over the routes of physical flows
The evidence suggests that pressure on strategic bottlenecks or critical chokepoints in international trade is also aimed at ‘containing’ China. In 2025, the US supported Panama’s decision to terminate the contract with the Hong Kong-based company CK Hutchison Holdings to manage the Panama Canal. Between March and May 2025, the US also launched attacks in Yemen, codenamed Operation Rough Rider, in the context of the Red Sea crisis. During the same year, the US administration repeatedly threatened to take control of Greenland (Denmark), most likely with the aim of controlling the Arctic route. The recent attack on Iran in February 2026 and the subsequent attempt to block the Strait of Hormuz, point in the same direction. In April 2026 US Secretary of Defense Pete Hegseth hailed the establishment of a “major defence cooperation partnership” with Indonesia, with the possible aim of gaining influence over the Strait of Malacca, which the US had already identified in 2017 as a critical chokepoint for fossil fuel trade[3].
These facts about the control of flows can be supplemented by the words of Senator Sullivan from Alaska talking about a major Liquefied Natural Gas (LNG) export project under construction that really doesn’t make any economic sense except if LNG was cut off to East Asia from West Asia.[4]
Incidentally, most of these developments are having a critically damaging effect on Europe.
Ultimately, regarding the physical dimension of the petrodollar concept, these developments appear to be leading to a fragmentation or regionalisation of the market, a reduction in OPEC’s influence, increased difficulties for China and its production region in accessing cheap energy, and rising prices to make the US fossil fuel industry viable and profitable.
Control over financial flows generated by the fossil fuel industry
This brings us to the second part of the petrodollar concept: the dollar and the financial dimension of control within the unipolar worldview.
First, it is important to consider the broader context. On one hand, currency dominance is surprisingly resilient and often is the last of the great power privileges to fall. The British pound, for example, still dominated global trade and finance in the early 1920s, although the United Kingdom’s military and economic dominance had long waned.[5]
On the other hand, the first signs of geopolitical fragmentation in global finance are becoming visible. Several studies using current data[6] suggest that ideological distance between countries shapes the size and direction of capital flows, while other studies[7] find that foreign direct investment flows increasingly correlate with geopolitical tensions and realignment in recent years.
In this context, it appears that the latest moves by the Administration in general, and the Federal Reserve in particular, seek to tackle the American decline by once again placing the burden on the shoulders of the working class, both at home and abroad.
Domestically, US debt -39 trillion dollars in April 2026 and rising by 87,547.56 $ per second in 2025[8]– is placed in a prominent place in the public debate, which is not without its contradictions. The elites seek to maintain ever-increasing defence spending to impose their worldview whilst cutting taxes for the wealthiest individuals and large corporations. This creates a chronic deficit that generates further debt, thereby increasing pressure to the American society trough consequences such as the rise of interest rates.
In addition to the consequences of the debt and the failed tariff policy justified by arguments such as the overvaluation of the dollar[9], there has been the recent rise in fuel prices due to the escalating conflict with Iran. Taken together, these factors have significantly reduced the purchasing power of the American working class.
On the international stage, rising fossil fuel prices for the rest of the world have an impact that goes beyond simply spending a few dollars more than necessary, as they push governments to resort to the ‘business as usual’ approach of austerity.
Controversial issues
However, these alleged plans face several problems and obstacles beyond those already mentioned. Some of these could be listed quite simply, although their explanation and consequences could carry much greater weight and could derail this unipolar vision to keep the hegemon alive and strong. Firstly, China (and Japan) hold large amounts of US debt and, although it is not in their interest to dispose of it too quickly and abruptly, this represents a negative incentive cannot be ignored. Second, the US productive sector may not be able to sustain the pace of increased fossil fuel extraction required to underpin plans for energy dominance. Added to this capacity issue is the fact that US crude is not the most suitable type – it is too light – for the refineries in buyer markets. Furthermore, the likely inflationary consequences of these plans could trigger uncontrollable socio-political unrest, particularly given Palantir’s growing presence within the social control ecosystem associated with potential repression.
Petrodollar 2.0
In short, we are witnessing an attempt by the United States to create a ‘Petrodollar 2.0’ system by maintaining physical and financial control over the fossil fuel market, whilst capitalizing on its hegemonic position in a world that is rapidly evolving towards a multipolar system.
For decades, the US plans -and their first moves- were enough guarantee to indicate how things would end. But in the early stages of multipolarity, only time will tell how this struggle between the hegemon and the Global South will end. These players on the board have enough leverage -both physical and financial- to change the course of action significantly.
Uncertainty is the main driver in the petrodollar arena. Suddenly, new factors emerge that could alter the course of events, such as a blockade to the Iranian control of the Strait of Hormuz, or the potential halt to Iranian oil production due to the saturation of its oil storage facilities, which are unable to export or use. There are new developments every week, and we need to keep a close eye on how key issues unfold this year, as they could shape the future.
Article originally published at Makroskop das magazin (in German): https://makroskop.eu/242026/petrodollar-20/
[1] U.S.–Saudi cooperation agreement supporting petrodollar pricing and reinvestment. “The Deal That Keeps the Oil Flowing.” Harvard University‑WCFIA
[2] https://infobrics.org/en/post/77791 https://infobrics.org/en/post/86821
[3] https://www-eia-gov.translate.goog/todayinenergy/detail.php?id=32452&_x_tr_sl=en&_x_tr_tl=es&_x_tr_hl=es&_x_tr_pto=tc
[4] https://youtu.be/iPN0McM5BAE?si=fM7He0rHV7-CTrK7
[5] Kennedy P. 1987. The Rise and Fall of the Great Powers. New York: Random House
[6] Kempf E, Luo M, Schäfer L, Tsoutsoura M. 2023. Political ideology and international capital allocation. J. Financ. Econ. 148(2):150–73
[7] Aiyar S, Ohnsorge F. 2024. Geoeconomic fragmentation and “connector” countries. MPRA Work. Pap. 121726, Munich Pers. RePEc Arch., Munich and Gopinath G, Gourinchas PO, Presbitero AF, Topalova P. 2024. Changing global linkages: a new cold war? IMF Work. Pap. 2024/076, Int. Monet. Fund, Washington, DC
[8] https://www.jec.senate.gov/public/index.cfm/republicans/debt-dashboard
[9] Stephen Miran is a member of the Federal Reserve Board of Governors, and he produced the following paper in 2024: