In retaliation for the U.S. military support to Israel in the Yom Kippur War in June 1973, the Arab countries of the Organization of Petroleum Exporting Countries began to impose an oil embargo on the United States, which led to a fourfold increase in oil prices. What followed was inflation and the stock market crash, and the American economy was about to get out of control.

1July, 974, the newly appointed US Treasury Secretary William? Simon and his deputy Gary? Paschi visits Saudi Arabia. Discuss and sign a secret plan: the United States buys oil from Saudi Arabia (Saudi Arabia uses the US dollar as its currency) and provides it with military assistance. In return, the petrodollars Saudi Arabia will get can be used to buy US government bonds outside the auction mechanism. After that, Saudi Arabia held a total of11700 million US dollars.

1971August 15, President Nixon delivered a televised speech, announcing to the world that the dollar was decoupled from gold. This means that the Bretton Woods system in which the dollar is pegged to gold and other countries' currencies are pegged to the dollar has collapsed. This also means that the global currency has entered the era of credit system.

Petrodollar agreement binds the pricing power of US dollar and crude oil, and establishes the monopoly position of US dollar in the pricing currency of international oil transactions. At present, regardless of spot or futures and their derivatives markets, most global commodities such as oil, gold, non-ferrous metals and agricultural products are priced in US dollars. It is through the monopoly of US dollars on oil and other commodities that the United States maintains and consolidates its position as the most important international currency in the world.

Challenge petrodollars

The attempt to challenge the petrodollar pricing mechanism will be strongly blocked by the United States and face political risks. Historically, three countries have openly challenged the petrodollar pricing mechanism.

The first country is Iraq. During Saddam Hussein's administration, Iraq changed its oil sales to be denominated in euros in June 2000. Some observers believe that the United States launched the Iraq war largely because Iraq changed the settlement currency of oil exports from dollars to euros. The deep-seated purpose of the American war is to attack the euro and safeguard the hegemonic position of the dollar.

The second country is Iran. In March 2006, Iran established an oil exchange, with the euro as the trading and pricing currency. However, Iran has been sanctioned by the United States and Europe.

The third country is Venezuela, which has established a barter trade mechanism with oil and 12 Latin American countries (including Cuba).

Putin's counterattack

After the outbreak of the Russian-Ukrainian war, 48 countries and regions such as the United States, Britain, Europe and Japan successively imposed severe economic sanctions on Russia. Including freezing the assets of Russian central banks, banks, enterprises and government officials, and excluding Russian banks from the SWIFT system. Putin said, "It is meaningless for us to continue to transport goods to the EU and the United States and then receive euros, dollars or other currencies."

On March 23, Russian President Vladimir Putin announced that when Russia supplies natural gas to EU member states, the United States and other "unfriendly countries", it will switch to rubles for settlement.

Affected by this news, European natural gas prices rose by 34%. The exchange rate of the ruble against the US dollar immediately rose to a three-week high of 95 rubles 1 US dollar and remained below 100 rubles 1 US dollar.

As an important oil exporter in the world, Russia uses rubles or RMB to settle its oil exports to China. Does it also use rubles to settle its oil exports to "unfriendly countries" such as EU member States and the United States? Let's wait and see.

In any case, dollarization of oil trade will shake the international monetary status of the US dollar to some extent.