The petrodollar at fifty — what's left after Saudi-China yuan crude

David E. Spiro, in *The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets* (Cornell, 1999), assembled the documentary record of how the United States and Saudi Arabia constructed the post-1973 oil-price-shock settlement. The book reads US Treasury, State Department, and Saudi finance ministry records to show that what is now called 'the petrodollar deal' was a series of separate arrangements negotiated through 1974 and 1975.

The components, in Spiro's reading, were: an implicit US security guarantee to the Saudi monarchy after the 1973 Yom Kippur war; Saudi pricing of crude in US dollars; Saudi purchase of US Treasury securities through a special non-auction window; and US Treasury Department non-disclosure of Saudi holdings, which lasted until 2016. The deal was never a single signed treaty. It was an interlocking set of understandings backed by parallel diplomatic exchanges.

The 2024 question is what survives. The security guarantee is being publicly renegotiated — the 2023 Biden-MBS talks, the post-October-7 strain, the 2024 Saudi defense-pact draft circulated in Washington. Dollar pricing of Saudi crude remains the dominant practice but is no longer universal: Saudi Aramco accepted yuan settlement on a portion of its China crude sales beginning in 2023, with estimates of 5-7 percent of Saudi crude moving in non-USD by 2024. Saudi Treasury holdings remain large (over $130B in 2024) but have been diversified into other dollar assets and into euro and yen reserves.

The analytical mistake to avoid is reading these adjustments as the petrodollar's collapse. Karen Young at Columbia's Center on Global Energy Policy has argued the more accurate frame is that Saudi Arabia is hedging within a dollar-dominant system, not exiting it. Yuan pricing on the margin gives Riyadh negotiating room with both Washington and Beijing without committing Saudi reserves to renminbi-denominated assets at any significant scale.

Spiro's framework anticipates this. The petrodollar lasted because the alternatives — gold, baskets of currencies, non-US security guarantees — were systematically worse for Saudi interests across the relevant time horizons. The 2024 shift reflects that some of those alternatives have become marginally less bad, not that the underlying logic has collapsed.

­The term petrodollar describes the post-1974 institutional arrangement in which oil-exporting states price their crude exports in US dollars and recycle the resulting dollar earnings into dollar-denominated financial assets, principally US Treasuries. The arrangement was politically grounded in the secret 1974 agreement between the Nixon administration and Saudi Arabia that committed Riyadh to dollar invoicing in exchange for US security guarantees and arms-export privileges. The arrangement gave the dollar a structural demand floor for as long as oil was the largest single internationally traded commodity, and contributed to the dollar's broader reserve-currency position over the subsequent five decades.

The 2023 and 2024 reports of Saudi-China crude transactions settled in renminbi produced extensive commentary on the petrodollar's potential collapse. The actual transactions, based on credible reporting from David Cohen at S&P Global Platts and other industry sources, have been smaller in volume than the headlines suggested. Saudi crude exports to China are now partly settled in renminbi for delivery contracts that include Chinese refining operations; the share of total Saudi crude exports settled in renminbi remains under 5%, with the bulk still settled in dollars or in dollar-equivalent terms (often the Saudi Light price benchmark expressed in USD even when payment occurs in another currency). The institutional substitution that the petrodollar's foundational logic requires has not occurred.

The deeper question is whether the petrodollar arrangement, even at its institutional peak, was as load-bearing for the dollar's international position as the term implies. The scholarship on this question — Adam Tooze at Columbia, Daniel Yergin at S&P Global, Eswar Prasad at Cornell — has tended toward the view that the petrodollar was significant but not foundational. The dollar's position rests on the depth of US Treasury markets, the liquidity of dollar funding markets, the network effects of dollar invoicing for trade beyond oil, and the rule-of-law assurances that underpin long-term dollar-asset holdings. The petrodollar recycling added a particular institutional layer; it did not constitute the bulk of the dollar's structural demand.

The Saudi side of the bilateral with the United States has evolved across multiple administrations. The 2017 Trump-era expansion of Saudi-US defense procurement, the post-Khashoggi tensions, the OPEC+ disputes over production quotas through 2022 and 2023, and the post-October-2023 regional realignment have all stressed the bilateral. The dollar-invoicing piece of the original 1974 arrangement, however, has not been formally repudiated; what has happened is that Riyadh has expanded its commercial relationships with non-dollar counterparties, and selectively invoices specific contracts in non-dollar terms where the counterparty's operational requirements make that more efficient.

The Chinese side of the equation is more measured than the headline reporting suggests. Beijing has a stated interest in increasing the renminbi's role in commodity invoicing, and has progressed that agenda through specific bilateral agreements and through the operation of the Shanghai International Energy Exchange (INE) — which trades renminbi-denominated crude futures that have built modest but real volumes since the 2018 launch. The INE volumes remain a fraction of the Brent and WTI benchmark trading volumes, but they exist, they clear, and they price renminbi-denominated crude contracts that some Chinese refiners use as their hedging benchmark.

The 2024-2026 trajectory, on the available evidence, is incremental rather than transformative. The dollar's share of crude invoicing remains around 85-90% globally. The renminbi's share is in the low single digits and growing slowly. The other-currency share — local-currency settlement arrangements between specific bilateral pairs (India-Russia, Russia-China, UAE-India in selective deals) — is also growing from a small base. The petrodollar at fifty is not dead. It is no longer the unrivalled standard it was at twenty-five. The institutional architecture that the dollar's international position rests on extends well beyond the petrodollar piece, and the broader architecture has not been displaced.

The forward-looking implication of this analysis is that the structural drivers identified above will continue to shape policy trajectories across the second half of the 2020s. The doctrinal frameworks, institutional arrangements, and bilateral relationships described in the preceding sections are durable across multiple electoral cycles in the participating capitals, and any disruption of them would require shifts in underlying interests rather than rhetorical adjustment. The analytical reading developed here is not a prediction of a specific outcome at a specific date. It is a framework for reading the next round of developments — the summits, the policy announcements, the data releases, the bilateral and multilateral diplomatic moves — against the structural constraints the framework identifies. Each subsequent development can be read as confirming or refining the framework's predictions, and the cumulative pattern across multiple developments is what produces the analytical clarity that policy work most often needs. The headline-driven coverage of any specific event will continue to misread the broader trajectory; the data-driven, frame-anchored reading developed here is the antidote to that misreading and is the analytical discipline the policy community most needs across the remainder of the decade. The arithmetic of the underlying interests does not change quickly. The political and rhetorical surface above the arithmetic does change, sometimes quickly, and reading the two together is what produces analytical durability and policy-relevant insight that survives the news cycle.

The institutional research that underwrites this reading — the policy papers, the journal articles, the open-source datasets, and the running track records of the named scholars — represents a body of work substantially larger than any single explainer can summarise. Readers seeking deeper engagement should consult the primary sources cited in the preceding sections directly. The reading developed here aims to be a useful entry point rather than a substitute for that primary literature, and the framing has been chosen to surface the analytical moves that carry the most explanatory weight across the largest set of subsequent developments. A reader returning to this material in a year, in three years, or in five years should still find the framework usable, because the structural relationships it describes change more slowly than the headline developments they organise. The decade ahead will produce many specific events that this analysis cannot anticipate. The framework, if it is the right one, will help organise those events as they arrive.