The End of the Petrodollar? How Iran War Is Reshaping the Global Economy: Author Laleh Khalili
Professor of Gulf studies Laleh Khalili lays out the global economic implications of the effective closing of one of the world's "major choke points for oil," the Strait of Hormuz. "It doesn't benefit the average U.S. citizen … at the gas stations, but it does benefit the oil companies," says Khalili. "The higher the price of oil goes up, the relatively cheaper it becomes to actually have sustainable alternatives. Of course, that means that it benefits China … since China is way ahead of the rest of the world in producing these technologies."
Great powers rarely separate economic production from monetary policy. Behind every strong trade route and factory is a currency that the go
While Kiyosaki is famous for hyperbole, others have argued this “Petrodollar War Theory” in a more sober and scholastic way. It posits that the U.S. intervenes abroad not primarily for national security or humanitarian reasons, nor even to seize oil directly, but to preserve the dollar’s role as the world’s energy-trading currency. According to this theory, countries that attempt to price oil in euros, yuan or other alternatives find themselves sanctioned, destabilized—or even invaded.
Is this true? Let’s unpack it.
For fifty years, the global oil market has run on dollars. But when control of the world’s most important energy chokepoint becomes linked to currency, the foundation of that system begins to shift.
🛢️ A currency chokepoint emerges: Iran is reportedly considering allowing oil tankers through the Strait of Hormuz only if the cargo is traded in Chinese yuan rather than US dollars. 🚢 A vital artery at risk: Roughly 20% of the world’s oil supply normally passes through the strait, making it the most strategically important energy passage on Earth. 🇨🇳 A yuan oil corridor: Reports indicate that millions of barrels of Iranian crude have already moved through the region to China with payments denominated in yuan instead of dollars. ⚓ A military response: The United States has deployed thousands of Marines aboard the USS Tripoli alongside naval assets in an effort to secure the waterway and protect global shipping. 💱 Currency as a geopolitical weapon: If oil shipments begin moving preferentially through yuan-denominated channels, the conflict shifts from a naval confrontation into a financial one. 📉 Pressure on the petrodollar system: Since the 1970s, most global oil trade has been priced in dollars — reinforcing demand for US currency and supporting American financial influence. 🌍 A larger strategic shift: With China building alternative payment infrastructure and several energy exporters experimenting with non-dollar trade, the Hormuz crisis could accelerate an already emerging trend toward a more fragmented global energy market.
what actually is the Petrodollar system? How does it work? Why was it put in place? What's the future of the Petrodollar?
In this video, we dive into the topic. Keeping the Petrodollar afloat explains all the US foreign policy, and all geopolitics, for more than 70 years. Everything from the first Gulf War, to the War in Iraq, to Russia's invasion of Ukraine, to the current War with Iran. 00:00 - Introduction 00:30 - Why Is Oil So Important? 01:17 - How the US Dollar Controlled Global Economy 01:53 - Gold Standard and The Nixon Shock 02:44 - Global Reserve Currency 03:20 - Petrodollar Agreement with the Saudis 04:00 - How the Petrodollar System Works 05:00 - Petrodollar Recycling 05:43 - Future of the Petrodollar 06:06 - Why Hostile Countries Trade In Dollars 06:50 - China and Russia
More destruction, destabilization and potential blow back… why? Because Israel wants it, petrodollar hegemony and empire. That's why.
We discussed all this and much more in our recent podcast with Lee Camp: https://thefreethoughtproject.com/podcast/podcast-lee-camp-iran-empire-deconstructing-the-america-first-betrayal
Maduro Removal In Defence of the Petrodollar System and Energy Dominance
How energy control sustains petrodollar power against multipolar challengers, China, Russia, BRICS expansion, and alternative payment systems
The removal of Venezuela’s head of state formed part of a broader contest over the architecture of global payments, energy settlement, and monetary hierarchy. The operation did not arise from humanitarian urgency, democratic reform, or governance failure. Strategic pressure focused instead on a state occupying a key position within alternative trade and settlement networks that increasingly bypass dollar clearing and United States financial supervision.
Public admissions by senior United States officials clarified the absence of structural change following leadership removal. Secretary of State Marco Rubio stated that “all of the problems we had with Maduro when Maduro was there—we still have those problems,” confirming continuity of policy objectives rather than transition or reform. Sanctions, oil restrictions, and conditional relief remained intact, demonstrating that the target involved system alignment rather than individual leadership behaviour. Such continuity aligns with earlier United States interventions where regime change served as an instrument for enforcing compliance within a wider financial and energy order.
Venezuela’s strategic value lies in energy reserves, settlement pathways, and participation in emerging multipolar trade structures. Venezuela holds the largest proven oil reserves globally and has increasingly settled oil exports outside dollar mechanisms through yuan-denominated contracts, barter arrangements, and bilateral clearing systems. Analysts including Michael Hudson have long described dollar hegemony as dependent upon energy pricing, reserve currency recycling, and sanctions enforcement rather than market neutrality. Oil transactions conducted outside dollar clearing reduce demand for United States debt instruments and weaken sanction leverage across the Global South.
China’s energy dependence amplifies Venezuela’s importance within this framework. China purchases between sixty and ninety percent of Venezuelan oil exports, alongside approximately eighty-five to ninety percent of Iranian crude, together accounting for roughly one third of Chinese oil imports. Additional Middle Eastern supply routes remain exposed to United States naval and financial pressure, giving Washington potential influence over close to seventy percent of China’s energy flows. Strategic analysts including J. Michael Waller argue that constraining Chinese energy security restricts Beijing’s capacity for high-risk military operations, particularly regarding Taiwan, while increasing pressure on Russia through forced price concessions on oil exports.
Energy dominance intersects directly with currency dominance. Settlement in dollars underpins United States fiscal sustainability through reserve demand and Treasury absorption. Both Democratic and Republican administrations have treated de-dollarisation as a strategic threat, regardless of rhetorical differences. Independent observers including Hudson and Glenn Diesen describe sanctions policy as a substitute for industrial competitiveness, relying on financial choke points rather than productive capacity. Control over banking rails, insurance markets, maritime corridors, and reserve currency issuance enables coercive enforcement without formal declarations of war.
The Venezuela operation occurred without multilateral authorisation and outside declared conflict, signalling willingness to bypass institutional constraints when financial interests face erosion. Pepe Escobar characterised the move as a “structural rupture,” reflecting desperation rather than confidence. Political economy theory distinguishes between confident hegemons that promote open systems and declining hegemons that weaponise access, a framework articulated by Diesen and echoed by multiple non-aligned scholars. Declining hegemons restrict technology transfer, sever currency access, and enforce compliance through sanctions, asset seizures, and regime pressure.
Sanctions imposed on Venezuela functioned less as corrective tools and more as mechanisms of enforced disconnection. Oil production, refining capacity, and export logistics remained constrained under United States licensing regimes even after leadership removal. Rubio’s remarks confirmed that relief would remain conditional upon Washington-defined benchmarks subject to revision. Such arrangements preserve leverage while preventing independent reconstruction or reintegration into alternative financial systems.
Claims framing the operation as democratic intervention conflict with outcomes on the ground. Institutional structures, security forces, and economic controls remained unchanged, while sanctions continued to suppress domestic energy revenues. Independent analysts described the action as “cosmetic,” removing a public figure while leaving the underlying economic siege intact. Continuity rather than reform characterised post-removal policy, reinforcing the assessment that sovereignty rather than governance lay at issue.
The broader geopolitical signal extended beyond Venezuela. Latin American governments now face recalculated risk assessments regarding currency exposure, energy partnerships, and political alignment. Zhao DaShuai emphasised the reality of power projection constraints for China and Russia, noting the absence of regional military infrastructure capable of countering United States action in the Western Hemisphere. Geographic distance, logistical barriers, and escalation risk limit external intervention options despite political sympathy or economic ties.
Energy markets and foreign exchange systems responded accordingly. Venezuelan oil assets, sovereign credit risk across Latin America, and emerging market debt instruments underwent repricing as investors reassessed United States willingness to enforce compliance through direct action. Petrodollar and petro-yuan narratives gained renewed attention, reflecting concerns regarding settlement safety and asset seizure risk. Gold and non-sovereign stores of value gained narrative strength, not as immediate price reactions but as long-term hedges against unilateral enforcement.
The operation also reinforced precedent regarding international law and institutional bypass. United States action occurred without Security Council authorisation and with explicit acknowledgement of regime removal objectives. Independent legal scholars have described such conduct as consistent with rogue state definitions, prioritising self-interest over norm adherence. Under previous administrations, similar objectives operated under humanitarian or democratic rhetoric, whereas current practice reflects reduced concern for narrative cover.
China and Russia face limited response options under these conditions. Military intervention remains implausible given distance and escalation risk. Economic retaliation risks further sanction exposure. Diplomatic condemnation carries minimal deterrent effect absent enforcement capability. Such asymmetry underscores the continued effectiveness of dollar-centred coercion despite increasing multipolar rhetoric.
The Venezuela case therefore illustrates the operational mechanics of financial warfare during a period of hegemonic transition. Energy control, settlement enforcement, and sanction leverage converge to discipline states attempting currency diversification or strategic autonomy. Leadership removal functions as one instrument within a broader toolkit designed to preserve system compliance rather than institutional reform.
Recommendations follow from these observations rather than ideological preference. States seeking autonomy within a multipolar order require redundancy across energy supply, settlement mechanisms, logistics, and financial infrastructure. Diversification alone proves insufficient without coordinated protection of trade corridors and insurance systems. Regional blocs require internal clearing arrangements insulated from external seizure risk. Industrial capacity and technological independence reduce vulnerability more effectively than diplomatic alignment. Absent such measures, participation in alternative monetary systems remains exposed to enforcement actions exemplified by the Venezuela operation.
Authored By: Global GeoPolitics
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