General

The global oil trade, an essential driver of the world's economy, has long been dominated by the US Dollar (USD) due to its global acceptance and status as the most significant reserve currency. However, recent trends in international trade are signaling a shift, with several nations increasingly opting for non-dollar currencies to settle oil transactions. This transition is prompting global discussions about the future role of the USD in global markets and its dominance in oil trading.

The UAE, a leading hub for oil transactions, has witnessed growing interest in trading oil and non-oil products in currencies other than the USD. While the US Dollar remains the primary settlement currency, countries are now exploring alternatives to reduce reliance on the USD and mitigate the risks of volatility, especially in forex markets. The move towards using local currencies for trade aims to lower costs, strengthen political and economic ties, and expand market access.

Non-Dollar Oil Trade Partnerships on the Rise

One of the most notable examples of this shift is the China-Russia oil trade. As of 2023, both nations have increasingly settled oil and non-oil trades directly in their respective currencies—Yuan and Rubles—after sanctions on Russia. This transition has led to record volumes of oil trade, with China purchasing 2.6 million barrels per day from Russia in July 2023 alone, surpassing previous records. By bypassing the USD, both countries aim to reduce trading costs and gain more autonomy over their economic affairs.

The China-UAE oil trade is also significant, with China being a major importer of UAE oil. In 2021, China imported $8.36 billion worth of UAE crude oil, in addition to petroleum gas and related products. The UAE remains a vital trading partner for China, and as global oil trade patterns shift, both countries are exploring ways to settle these transactions in currencies other than the USD.

Iran, which has faced years of economic sanctions, has pushed for Euro payments in exchange for its oil since 2016. The country continues to explore alternative currencies for settling international trade. In 2023, Iran approved the sale of $3 billion worth of crude oil to fund its armed forces, allowing the direct export of oil under a law enabling payments in Euros. Iran has also strengthened ties with China, with the two nations trading approximately 1 million barrels of oil per day in the first half of 2023.

Saudi Arabia and the Non-Dollar Debate

Saudi Arabia, another key player in the global oil market, has shown openness to moving away from the USD for settling oil transactions. In 2022, President Xi Jinping's visit to Saudi Arabia sparked discussions between the Chinese and Saudi leaders about the possibility of using the Chinese Yuan for oil settlements. These discussions reflect the growing interest in diversifying trading currencies and reducing the dominance of the USD in global trade.

The BRICS Alliance and the Future of Non-Dollar Trade

The BRICS alliance—comprising Brazil, Russia, India, China, and South Africa—has gained prominence as an advocate for reducing reliance on the USD. Formed in 2009, BRICS aims to promote economic cooperation among its members by using local currencies for trade rather than the USD. The UAE's interest in joining the BRICS alliance reflects its desire to explore more diversified and secure economic partnerships. In 2021, the UAE joined the BRICS New Development Bank (NDB), underscoring its commitment to fostering stronger ties with member countries.

The growing support for non-dollar trade settlements has the potential to reshape the global economic landscape. While the USD remains dominant, its future as the preferred currency for international trade faces challenges. As more countries, including those in the UAE, seek alternative currencies for settling oil and non-oil trades, the shift toward non-dollar settlements is becoming an increasingly significant trend in the global market.

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