The BRICS encompass a wide range of cultures, political systems and economic structures, enriching dialogue and cooperation among its members. This bloc was formed with the objective of promoting economic and political cooperation among its members.
BRICS nations considering adopting petroyuan for oil trade as part of its continued de-dollarization efforts, according to economic expert Herbert Poenisch. He pointed out that the group that makes up Brazil, Russia, India, China and South Africa could discuss alternatives to the petrodollar at its Kazan summit.
Poenisch highlighted Saudi Arabia’s possible shift towards petroyuan and Russia’s plans to reduce dependence on the dollar. However, challenges remain, particularly the availability of renminbi for oil-importing countries.
Poenisch, senior fellow at Zhejiang University and former economist at the Bank for International Settlements, detailed in an op-ed published by the Official Monetary and Financial Institutions Forum (OMFIF) why the BRICS bloc is considering introducing the petroyuan during its upcoming efforts. of defolarization at the summit of Kazan that will be held in October. OMFIF is an independent think tank focused on central banking, economic policy and public investment.
BRICS AND THE ROAD TO DESDOLARIZATION
He explained that the expanded BRICS Group – which now includes Brazil, Russia, India, China, South Africa, Saudi Arabia, the United Arab Emirates (EAU), Iran, Egypt and Ethiopia– I could use Kazan’s summit to explore alternatives to the Petrodollar system. Noting that “Saudi Arabia, the world’s leading oil supplier, has also joined Project Mbridge, the Bank for International Settlements’ digital currency arrangement,” he opined: “The country has commented on considering alternatives to the current dollar-based oil payment system and being open to using the petroyuan for oil settlements..”
Significant developments have happened since the Johannesburg summit in 2023, including Russia’s push to reduce dependence on the dollar, Poenisch stressed, adding: “Russia is planning a new denomination for oil, the petroyuan, its own Mbridge system for paying for oil and even a common BRICS currency to reduce dependence on the dollar..”
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However, he pointed out that challenges for Petroyuan persist, especially in terms of renminbi distribution. “The main challenge for the petroyuan will be making enough renminbi available to major oil-importing countries like India. As they have no current account surpluses with China, these countries do not gain enough Renminbi to pay their oil imports. They must be provided with Renminbi through other channels, ”Poenisch described.
Furthermore, the success of the petroyuan will require a mechanism to recycle renminbi surpluses, which Poenisch argued would benefit Chinese banks. He opined: “The main beneficiaries of the increased role of the renminbi will be Chinese banks, making much-needed profits from the recycling process.”
“Western financial intermediaries can join hands by arbitraging between the dollar-denominated oil market and the renminbi-denominated oil market. However, the introduction of a Petroyuan will only encourage the fragmentation of the global financial system, ”he concluded.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
