By Kenneth M. Stokes, PhD* – Article sent to Other News by the author
For half a century, the “petrodollar” has served as convenient shorthand for American monetary power. Oil is priced in dollars; oil exporters accumulate dollar revenues; those dollars are recycled into Western financial markets; and the United States gains an exceptional capacity to finance itself and project influence abroad. Today, as Gulf states diversify their political and economic relationships and BRICS countries experiment with alternative currencies and payment systems, a familiar conclusion follows: weaken the petrodollar and the dollar itself must eventually decline.
There is truth in this account. But it mistakes one important mechanism of dollar power for the system as a whole.
Dollar centrality did not originate with the American–Saudi arrangements of the 1970s. Eurodollar markets had already created a vast offshore system in which banks outside the United States generated dollar-denominated credit and accumulated dollar claims. Petroleum revenues later reinforced this system, but did not create it. Today, the dollar remains embedded not only in oil invoicing but in international borrowing, bank funding, reserve accumulation, collateral, foreign-exchange markets, corporate balance sheets and crisis liquidity.
This distinction matters. A country may begin trading oil in renminbi, rupees or its own currency without leaving the dollar system. Its banks may still borrow in dollars. Its corporations may still require dollar financing. Its central bank may still hold dollar assets. Its financial institutions may still depend on access to dollar liquidity when markets tighten.
Nor is monetary interdependence itself the problem. International trade and finance require institutions capable of settling obligations, providing liquidity and carrying credit across jurisdictions and through time. The harder question is whether those arrangements remain answerable to the economies and societies they connect, or whether access to them increasingly becomes a means of converting dependence into political discipline.
The emerging challenge is therefore deeper than the possible “death of the petrodollar”. It concerns the changing relationship between monetary dependence and political consent.
For decades, American monetary predominance survived not because Gulf partners simply accepted a fixed hierarchy, but because the arrangements sustaining it could be renegotiated as their wealth and bargaining power increased. After the upheavals of the 1970s, higher oil revenues did not end American predominance; they helped transform it. Gulf wealth financed investment, arms purchases, development and geopolitical projects from which both sides derived unequal but substantial benefits. The resulting interdependence constrained Washington, but it also gave oil exporters a growing material stake in the stability of the financial system through which their surpluses were invested.
Consent, in this setting, did not mean acquiescence. Gulf governments could seek greater autonomy while continuing to participate in arrangements that reproduced American monetary power. What sustained the arrangement was a continuing judgement by its principal participants that the benefits of participation outweighed its constraints, even where wider costs were displaced onto actors and societies outside the bargain.
The question today is whether that capacity for accommodation still exists.
The extensive use of sanctions, asset freezes and restrictions on financial access has demonstrated that monetary interdependence can also create political vulnerability. Governments considering alternatives to the dollar need not believe that American financial power is close to collapse. They need only conclude that excessive reliance on institutions ultimately subject to US authority constitutes a strategic risk.
A paradox follows. The more Washington uses the privileges of dollar centrality to discipline other states, the stronger the incentive for those states to reduce the dependencies that make such discipline possible.
Yet exit is not straightforward. Dollar-denominated debts must still be serviced. Existing reserves must retain their value. Banks require liquidity. Corporations depend on established financial markets. Governments fear exchange-rate instability. A rapid disengagement from the dollar could therefore impose serious costs on the very states seeking greater monetary autonomy. And those costs would rarely be borne evenly: the first casualties of monetary disorder are usually those with the least capacity to protect themselves against inflation, capital flight, disrupted imports or externally imposed adjustment.
The result is neither the continuation of dollar hegemony in its traditional form nor a linear process of de-dollarisation. It is something more contradictory: the gradual construction of alternatives within continuing dependence.
The transition need not begin with the liquidation of existing dollar holdings. A more consequential early indicator may be a change in flows rather than stocks. Governments, sovereign funds and financial institutions can remain heavily invested in dollar assets while directing a growing share of new surpluses, investment and settlement elsewhere. Decades of recycling have given holders of those assets an interest in avoiding disorderly rupture even as they redirect some of the new flows through which the system is reproduced. Dollar dependence may therefore remain formidable while its future reproduction weakens.
This helps explain the strategic importance of the Gulf. The Strait of Hormuz is not merely an oil choke-point, and Gulf relations with Washington cannot be reduced to a simple bargain in which American security guarantees ensure that petroleum is traded in dollars. Security commitments, energy flows, arms purchases, investment, reserve management and political alignment have reinforced one another for decades. If confidence in one element weakens, governments may reassess the others.
The key question is therefore not whether Saudi Arabia or other Gulf producers will abruptly cease accepting dollars. It is whether the arrangements that once made monetary dependence advantageous can still be renegotiated on terms acceptable to partners whose economic and political autonomy has substantially increased.
There is a further historical irony. The petrodollar system helped create some of the capacities that now make diversification possible. Decades of oil wealth, investment, infrastructure development and international integration strengthened Gulf states economically and enlarged their diplomatic room for manoeuvre. Successful incorporation into an American-centred system therefore did not merely reproduce dependence; it also helped create actors increasingly capable of negotiating and diversifying it.
This also changes how BRICS should be understood. Alternative payment systems, bilateral currency settlement and swap arrangements matter less because any single mechanism can replace the dollar than because, collectively, they can reduce dependence on any one monetary centre. Their significance lies not simply in making exit possible, but in enlarging the capacity of states to contest terms, diversify exposure and adjust without catastrophic rupture.
This should not be romanticised. Replacing one dominant currency with several competing monetary centres would not automatically produce a more equitable system. Chinese, Gulf, Indian or other financial institutions could reproduce familiar patterns: creditor privilege, politically selective liquidity, coercive conditionality and the transfer of losses onto weaker states. Multipolarity may redistribute monetary power without transforming the underlying organisation of financial vulnerability.
The more important question, then, is not which currency prevails, but what form of monetary interdependence succeeds the present system.
A viable international monetary order would need to provide emergency liquidity without converting dependence into political subordination; allow countries to adjust without destroying essential productive and social capacities; distribute the costs of financial crises more equitably between creditors and debtors; and preserve enough institutional plurality that no single centre can turn indispensable monetary mediation into unanswerable command.
Seen through an ecology of power, the question changes. Monetary power cannot be judged solely by who controls the dominant currency, how many transactions it settles or how effectively financial pressure secures an immediate objective. It must also be judged by what its exercise does to the relationships on which its future effectiveness depends: whether it sustains cooperation and adjustment, or progressively generates distrust, substitution and resistance.
From this perspective, the contemporary petrodollar debate is best understood as a symptom of a broader historical transition.
American monetary power is unlikely to disappear simply because oil is invoiced in alternative currencies. Nor will BRICS dismantle it merely by building new payment infrastructures. The deeper transformation proceeds more gradually: governments continue using the dollar because abrupt exit remains costly, redirect portions of new financial flows because concentrated dependence creates vulnerability, and construct institutions that enlarge their future capacity to bargain, diversify and adjust.
But the deeper test is not whether dollar centrality can still be preserved. It is whether the monetary arrangements sustaining it continue to perform the functions that justify their centrality — settlement, liquidity, investment and adjustment — without requiring the economies and societies they connect to absorb mounting costs merely to preserve the arrangement itself.
The outcome is not predetermined. American monetary predominance has survived previous crises because the United States could adapt the terms on which others participated in it. Its contemporary vulnerability will therefore be measured not simply by de-dollarisation, but by whether Washington can still accommodate greater autonomy without increasingly substituting coercion for advantage.
In the near term, the implications are quieter than predictions of dollar collapse but potentially more consequential. Gulf states can retain substantial dollar assets while directing more new investment and settlement elsewhere. Washington can retain formidable financial leverage while each coercive use of it strengthens incentives to diversify. BRICS need not replace the dollar to matter; alternative institutions matter when they give states credible room to negotiate, adjust and refuse without incurring intolerable disruption.
The immediate contest is not over the disappearance of the dollar. It is over whether monetary interdependence remains something states choose because it serves them, or something they endure because the price of refusal is too high. An order that increasingly requires coercion to reproduce dependence may remain powerful for years; but it has already begun to consume the consent on which durable power depends.
*President of the World Sustainability Forum. This article draws on the author’s project, The Ecology of Power, which develops an ecological theory of power re-conceiving conflict, security and peace as emergent properties of institutional, epistemic and civilisational ecologies.