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<\/p>\nThe U.S.-Iran conflict and Trump\u2019s tendency to weaponize the dollar are hastening attempts by China to de-dollarize oil and gas markets, boosting the use of the \u2018petro-yuan\u2019, while pushing the EU to resurrect plans to strengthen the euro on the global stage. A tripolar monetary order is emerging, in which the dollar would be \u2018first among equals\u2019 and the renminbi, and the euro, would have their rightful place, commensurate with their importance in the global economy.<\/p>\n
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Since U.S.-Israeli attacks on Iran began at the end of February 2026, Tehran has used the Strait of Hormuz \u2013 possibly the world\u2019s most critical maritime energy chokepoint \u2013 as a bargaining tool in its tug-of-war with Washington, closing the Strait to enemy vessels, while allowing the passage of container ships only from friendly countries on which Iranian authorities seek to impose fees payable in Chinese yuan or cryptocurrency, a move opposed by U.S. President Donald Trump who responded by imposing a naval blockade. <\/p>\n
Iran\u2019s choice of payments is an indication of the emergence of China\u2019s monetary power. The Chinese yuan, or renminbi, is already used by Saudi Arabia and other Gulf countries when selling their oil and gas to Beijing. The so-called \u2018petro-yuan\u2019 \u2013 first introduced in 2018 through the creation of yuan-denominated oil futures on the Shanghai International Energy Exchange \u2013 has seen its adoption accelerated following the U.S.-Iran war.<\/p>\n
While Tehran uses the Chinese currency to bypass Western sanctions \u2013 which increase settlement risk for companies – other Middle East countries use the petro-yuan, alongside the dollar, to diversify their risk exposure and reduce dependency on U.S.\u2019 economic and political decisions. By encouraging their firms to seek alternative payment systems, a growing number of oil and gas producing countries make yuan invoicing more attractive, and ultimately contribute to reserve diversification \u2013 a trend facilitated by the development of China\u2019s Cross-Border Interbank Payment System (CIPS), a clearing and settlement network launched by the People\u2019s Bank of China (PBOC) in 2015 to handle cross-border renminbi transactions to provide an alternative to the Western-dominated Society for Worldwide Interbank Financial Telecommunication (SWIFT). <\/p>\n
Middle East countries have become an important lynchpin of the CIPS. For instance, Abu Dhabi Bank joined the CIPS as a direct participant in mid-2025 and in late October of the same year became an official renminbi clearing bank. This development was hastened by the \u2018mBridge\u2019 project \u2013 a cross-border payments platform launched by central banks in China, Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia as an alternative to dollar-dependent global payment systems. <\/p>\n
Before the renminbi, the euro was tested to challenge the petrodollar. Following the creation of the European common currency in the late 1990s, some members of OPEC tried to use it as an alternative to the dollar in energy markets. At the end of 2000, Iraq under Saddam Hussein had begun asking for payment of its oil sales in euros instead of dollars \u2013 a move that was not followed through by EU leaders, due to structural weaknesses within the Eurozone, such as the absence of a common European safe asset and the limited integration of financial markets. It did not help either that Europe continues to depend on the US for its security. Greater use of the euro in international payments and as a reserve currency remains linked to Europe\u2019s capacity to become autonomous from Washington in the security and defence fields, since the connection between international monetary usage and military capabilities is well established. <\/p>\n
The current Middle East crisis, coupled with growing EU fallout with the traditional American ally under Trump, is pushing EU leaders to press ahead with plans to integrate financial markets and expand the supply of euro safe assets, including support for strengthening Europe\u2019s defence capabilities, The aim is to address the euro-area structural weaknesses, accelerate the promotion of greater use of the euro, and lessen Europe\u2019s dependency on Washington. Fears are growing in Brussels that an unpredictable U.S. administration could use the dollar as a tool of coercion to achieve foreign policy goals \u2013 a trend that has led the European Commission to resurrect plans to strengthen the euro on the global stage.<\/p>\n
Yet, it will take time to address the euro-area structural weaknesses, not to mention the difficulty to reach consensus among the 21 member states of the European Union that have adopted the European common currency. In these circumstances, some Eurozone officials are advocating collaboration with other major powers, particularly China, to advance a multipolar currency system that would reduce dependency on the dollar. <\/p>\n
Beijing has laid out plans for greater use of the renminbi in international exchanges and the creation of a multipolar monetary order. In an article written for the February 2026 issue of Qiushi Journal \u2013 the official publication of the Central Committee of the Communist Party of China \u2013 Chinese President Xi Jinping argued about the necessity to accelerate the building of a modern financial system with Chinese characteristics, lessen the reliance on the US dollar, and create a \u201cstrong currency\u201d \u2013 an idea initially outlined in a speech at the opening of a study session at the Central Party School on 17 January 2024. <\/p>\n
For Chinese leaders, the aim is not to replace the dollar, but rather to create an alternative system through which trade and payments can flow with less dependence on dollar-based platforms, and still operate within China\u2019s capital-control framework, as the renminbi continues to be non-convertible. In China\u2019s plan, the European common currency is an essential pillar of a multipolar currency system in which the dollar would be \u2018first among equals\u2019 and the renminbi, and the euro, would have their rightful place, commensurate with their importance in the global economy.<\/p>\n
Eurozone leaders too have advocated in favour of monetary multipolarity and supported China\u2019s monetary ambitions. In 2015, Christine Lagarde, International Monetary Fund (IMF) managing director from 2011 to 2019, supervised \u2013 and approved \u2013 the renminbi\u2019s inclusion in the basket of currencies making up the Special Drawing Right (SDR), a synthetic reserve currency that includes the U.S. dollar, the euro, the British pound and the Japanese yen. Last year Lagarde, who is currently the President of the European Central Bank (ECB), spoke of Europe\u2019s \u201cglobal euro\u201d moment, while the Governor of the Bank of France, Fran\u00e7ois Villeroy de Galhau, has been even more explicit, calling for the euro to openly challenge the dollar.<\/p>\n
The EU is the world\u2019s largest trade bloc in terms of goods and services combined accounting for around 16% of world trade (based on 2024 data). If only goods are considered, the EU’s share in global trade is 13.4%, after China (15.4%) and slightly ahead of the US (13.3%). Yet, of all global payments made via SWIFT, around 45% are in US dollars, while only one-third is in euros, and those in yuan represent 3.5%, according to the ECB<\/a> and the Deutsche Bank<\/a> which track these developments. While China still uses SWIFT, the bulk of payments in yuan currently transits through the CIPS, leading the People\u2019s Bank of China to claim<\/a> that the renminbi is now the world\u2019s second largest trade finance currency (after the dollar) and third largest payment currency (after the dollar and the euro). <\/p>\n