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Jan 24, 2026
Dhiresh Kulshrestha

Petrodollar & Battle for Black Gold: Evolution and Geopolitical Analysis

Introduction The petrodollar system is a way of pricing and trading oil predominantly in U.S. dollars, which has been a pillar of the global economic structure since its establishment in the 1970's. The petrodollar shaped the international finance, the United States' foreign policy, and the way a limited number of massive producers (the United States, Venezuela, and Iran) approach their oil market. This article discusses how the petrodollar came into existence, its peak era of global dominance, and what the United States, Venezuela, and Iran have in common regarding their strategic goals with regard to oil. The article also discusses how the dollar's hegemony is being challenged by global trends shifting toward de-dollarisation. The modern global economy is organised around a few key commodities and currencies, such as crude oil (black gold). Since the early 1970s, all international oil transactions have been priced and settled in U.S. dollars. As a result, the petrodollar system has created a link between energy and finance that has expanded the power of the U.S. economy while creating geopolitical conflicts between competing powers, both of whom want to achieve dominance within the international oil market. The Evolution of the Petrodollar System The petrodollar system originated in the early 1970s as a result of significant changes within the international monetary system. The Bretton Woods System established the U.S. dollar as the global reserve currency in the aftermath of the Second World War. Under this system, the dollar was backed by gold and currencies were pegged to it. When President Nixon ended the dollar's convertibility to gold in 1971, this marked a major transition of the U.S. dollar into a fiat (non-backed) currency, thereby changing how international markets operated. By the time the new currency system was established, the U.S. had already negotiated agreements with a number of major oil-producing nations, including Saudi Arabia, to price and sell all oil transactions globally in U.S. dollars. All of these agreements generated huge amounts of foreign investment in U.S. dollars and kept energy markets tied to the U.S. dollar and capital markets. As a result of these agreements, many think tanks began referring to the U.S. dollar received from oil exports as a "petrodollar." The petrodollar also served a much larger purpose, as the U.S. dollars received from the sale of oil were used to purchase U.S. financial assets, thus reinforcing the status of the U.S. dollar as the world's premier reserve currency. Mechanisms and Dynamics of Petrodollar Recycling The flow of Oil-export revenue back into U.S. Financial Markets from Oil-export countries, in U.S. Dollars (Petrodollars) is known as Petrodollar Recycling. The Effect of Petrodollar Recycling on the U.S. Dollar is to increase its strength through foreign demand for dollar-denominated assets. The flow of Petrodollars has facilitated the lower interest rate environment that exists in the U.S., made it easier for the U.S. to finance its large deficits and has created an abundant Global Liquidity Pool of Dollars. The early rise in the flow of Petrodollars occurred in the 1970s and 1980s and continues today as a result of high oil prices in the 2000s. During this time, oil-exporting countries built up very large trade surpluses. The bulk of these trade surpluses has been reinvested into U.S. Financial Instruments, effectively subsidising U.S. Fiscal Capacity and providing Global Liquidity in U.S. Dollars. ⁠The United States and Strategic Interests The United States has long had a strategic agenda that includes not only a stable level of dollar-denominated trading in [Global Oil], but also dominance over the flow of Global Oil. The [Petrodollar] system has provided significant geopolitical advantage to Washington through its ability to exert control over the flow of Global Oil and, thus, the U.S. dollar. Through the Petrodollar system: • Oil-producing countries (including OPEC) retain large reserves of U.S. dollars. • The U.S. continues to finance its military and commitments to the rest of the world through a stable level of demand for the U.S. dollar. • The flow of all Global Trade and Investment will continue to be anchored in the U.S. Capital Markets. However, post-2000s, significant structural changes took place. The development of U.S. shale oil production turned the U.S. into a net exporter of oil from a major importer, thus limiting the flow of Petrodollars. Moreover, OPEC Oil surpluses are increasingly used within each oil-producing nation, rather than being sent back into the global financial system. Recent geopolitical events regarding U.S. involvement in Oil-rich regions have rekindled discussions of Petrodollar objectives. Some analysts posit that U.S. strategic actions concerning Oil-rich nations (e.g. Venezuela) are, in part, motivated by a desire to retain control of Energy Resources and the Financial Flows associated with them in the U.S. Dollar sphere. ⁠Venezuela: Oil Reserves and Dollar Politics As of late 2022, Venezuela has the largest proven oil reserves in the world with 303.2 billion barrels, representing approximately 17% of global oil reserves (the highest percentage globally) – however, because of continued global pressure, Venezuela’s production has been restricted due to many severe economic and political crises. Venezuela was once a major supplier of oil to the world and produced a type of heavy oil that offered an advantage to U.S. refiners and world markets – but that output has been severely depressed as a result of international sanctions and mismanagement of its oil production facilities and infrastructure, with oil production falling from approximately 3.5 million barrels per day in 1998 to less than 1 million barrels a day now. Rank Country Proven Reserves (Billion Barrels) Daily Production (approx. 2026) 1 Venezuela 303.2 < 1.0 Million bpd 2 Saudi Arabia 267.2 ~10.8 Million bpd 3 Iran 208.6 ~4.1 Million bpd 4 Canada 170 ~5.5 Million bpd 5 Iraq 145 ~4.5 Million bpd 6 UAE 113 ~3.2 Million bpd From the table, it is clear that approximately 17% of the world’s oil reserves are located in Venezuela, but because of the country's deteriorated oil industry, it produces less crude oil than many non-OPEC nations that have smaller reserves and much more government revenue. Recently, many observers have viewed U.S. policies concerning control over Venezuela's energy infrastructure and potential for increased future production as part of a more comprehensive strategy to secure the petrodollar's continued dominance, especially due to Venezuela's recent proposals to begin to price its oil in currencies related to the euro and yen. Iran and Alternative Oil Pricing: New Geopolitics of the Middle East In addition to Venezuela, Iran has also been a critic of the petrodollar system. In the mid-2000s, Iran proposed the creation of an oil bourse, where oil would be traded in euros instead of dollars. In addition, Iran helped facilitate oil transactions in euros and other currencies during the last few years in order to avoid the impact of sanctions imposed by the United States. The moves of both countries fit into a global trend of diversification by oil producers that have begun to seek alternative currencies for oil trade to improve their resistance to political pressures and economic sanctions because of their geopolitical status. ⁠Challenges and De-dollarisation Trends: OPEC & Dollar Politics While the petrodollar is still a strong currency, many factors threaten its dominance and power: • De-dollarisation: As more crude oil is traded using currencies other than the American dollar (such as the Euro and Chinese Yuan), fewer people will depend on the US dollar; however, de-dollarisation has found different dimensions in the economic world order that may help control De-dollarisation through the US Petrodollar. • Strategic rivalry: Countries like China, Russia, Iran, and Venezuela have all researched and attempted to implement ways to price oil that is not tied to the US dollar to reduce the amount of oversight they experience through the US financial system and to have their own political and economic sovereignty. However, the ongoing crisis that began in Venezuela on 3 January 2026 has caused many of these countries' strategies to fall back into the dark and created an intersection between the two on how OPEC + will go about setting prices for their oil, with many preferring to prioritise stability over political alignment. • The Energy Transition: There will be long-term movements toward renewable energy sources, which could lessen the importance and eliminate the flow of dollars from the Middle East, as the timeline to develop energy transition technologies will require time for maturity. However, the US dollar remains the world’s dominant currency as it dominates in extremely large, liquid, well-developed financial markets and because the institutions (Federal Reserve, Treasury, etc.) of the US are trusted around the world, making it unlikely that there will be a complete replacement of the petrodollar system in the near future. Battle for Black Gold Impacts on Indian Economy: Pre-Budget Expectations Factor Status Impact on India Crude Oil Price Black Gold Brent at ~$65/bbl Moderate; inflationary pressure on the Rupee. Venezuela Supply Near zero Negligible; already adjusted to sanctions. Iran/Hormuz High Alert High risk; threatens 1/5th of global supply. Gold (Yellow) Record Highs Massive impact, households "pledging" gold for liquidity. U.S. Relations Tense Trump’s 500% tariff threat on Russian oil is the top concern. India is facing President Trump’s 500% tariff pressure and global crude oil supply shock; if it continues for a quarter or more, inflation in the Indian market might spike due to fractured trade ties. Besides, the prices of silver and gold have skyrocketed due to geopolitical fears and uncertainties. Increasing crude oil prices will generate inflationary pressure on INR. ⁠Conclusion The battle for black gold is not solely about barrels of oil — it is inextricably linked to the currencies in which those barrels are priced and traded. The USA has been setting the narrative to prove itself as the "Khalifa of the world’ with the launch of "Operation Absolute Resolve" on Jan 3, 2026 and capture of Maduro and Cilia Flores, and the swearing-in of Delcy Rodríguez as acting president, as published on ‘The Guardian on Jan 4, 2026. "Why has the US captured Venezuela's president and what happens next?". Turbulence in the world economic order is reshaping the new economic order and world economy. Being a policy analyst, we recall ‘The petrodollar system’, born from historical monetary shifts and reinforced through geopolitical strategy, has underwritten U.S. global influence for half a century. Yet, as structural changes in energy markets, rising powers, and de-dollarisation trends unfold, the World is facing not only new economic challenges, market ups and downs, uncertainty in terms of political instability, security concerns, is collapsing the business eco-system in top emerging economies like India, Germany and Japan. In India, the policy makers are on track to introduce the fiscal consolidation as the Union Budget 2026-27 on 1 February 2026 is being viewed through a lens of strategic insulation and cautious opportunity. The world is keeping a sharp eye on the US intervention in Venezuela, the threat to Greenland, Canada and unrest in Iran and the Middle East and impacts on Indian markets. Global uncertainties prompt Indian policymakers to focus on domestic energy security, reducing the cost of assets like developing the world class infrastructure for Renewable energy sources. References Triffin, R. (1960). Gold and the dollar crisis. Yale University Press. Hudson, M. (2003). Super imperialism: The origin and fundamentals of U.S. world dominance. Pluto Press. Nixon, R. (1971). Address to the Nation outlining a new economic policy. U.S. National Archives. U.S. Department of State. (1974). U.S.–Saudi Arabian Joint Commission on Economic Cooperation Agreements. Eichengreen, B. (2011). Exorbitant privilege: The rise and fall of the dollar and the future of the international monetary system. Oxford University Press. European Central Bank. (2023). The international role of the euro. https://www.ecb.europa.eu International Monetary Fund. (2023). Currency composition of official foreign exchange reserves (COFER). https://www.imf.org International Energy Agency. (2023). World energy outlook. https://www.iea.org World Bank. (2023). Global economic prospects. https://www.worldbank.org Reserve Bank of India. (2024). State of the economy report. https://www.rbi.org.in Ministry of Petroleum & Natural Gas, Government of India. (2024). Indian petroleum and natural gas statistics. https://pib.gov.in BP. (2024). Statistical review of world energy. https://www.bp.com U.S. Energy Information Administration. (2024). International energy outlook. https://www.eia.gov OPEC. (2024). Annual statistical bulletin. https://www.opec.org The Guardian. (2026, January 4). Why has the US captured Venezuela’s president and what happens next? https://www.theguardian.com India Today – World Desk. (2026, January 15). Can Iran shut down the Strait of Hormuz and set oil prices on fire? https://www.indiatoday.in

Jan 19, 2026
Myind Staff

President Sheikh Mohamed bin Zayed visits India, countries set ambitious trade, technology, strategic goals

India and the United Arab Emirates reaffirmed the strength of their growing partnership during the official visit of UAE President Sheikh Mohamed bin Zayed Al Nahyan to India on 19 January 2026. The visit took place at the invitation of Prime Minister Shri Narendra Modi and marked an important moment in the evolving relationship between the two countries. This was the fifth visit of President Sheikh Mohamed bin Zayed Al Nahyan to India in the last ten years and his third official visit since assuming office as President of the UAE. During the visit, both leaders reviewed the entire spectrum of India–UAE relations and expressed satisfaction that the Comprehensive Strategic Partnership between the two nations has steadily strengthened over the past decade. Prime Minister Narendra Modi and President Sheikh Mohamed bin Zayed Al Nahyan agreed that bilateral cooperation has gained depth and maturity across political, economic, strategic, cultural and people-to-people domains. They also welcomed the recent visits to India by the Crown Prince of Abu Dhabi, His Highness Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, and the Crown Prince of Dubai, Deputy Prime Minister and Minister of Defence of the UAE, His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum. The leaders noted that these high-level engagements reflect “generational continuity of the bilateral relationship”. The two leaders endorsed the outcomes of key institutional dialogues, including the 13th High-Level Task Force on Investments held in September 2025 and the 16th India–UAE Joint Commission Meeting, along with the 5th Strategic Dialogue held in December 2025. These platforms have played an important role in guiding cooperation and setting future priorities. Trade and economic cooperation featured prominently in the discussions. The leaders welcomed the strong growth in bilateral trade since the signing of the Comprehensive Economic Partnership Agreement (CEPA) in 2022. They noted that bilateral trade reached US$ 100 billion in the financial year 2024–25. Encouraged by this progress, both sides decided to set an ambitious target of doubling bilateral trade to US$ 200 billion by 2032. The leaders acknowledged the enthusiasm of business communities in both countries and described trade as a key pillar of the partnership. To ensure that economic growth is inclusive, the leaders directed their teams to focus on connecting Micro, Small and Medium Enterprises (MSMEs) from both sides. They called for the early implementation of initiatives such as “Bharat Mart”, the “Virtual Trade Corridor” and the “Bharat-Africa Setu”, which are aimed at promoting MSME products across the Middle East, West Asia, Africa and the Eurasia region. Investment cooperation was another major focus area. The leaders expressed satisfaction that the Bilateral Investment Treaty signed in 2024 has strengthened investment flows across several sectors. They welcomed discussions on a possible UAE partnership in the development of the Special Investment Region at Dholera in Gujarat. This proposed partnership includes infrastructure projects such as an international airport, a pilot training school, a maintenance, repair and overhaul facility, a greenfield port, a smart urban township, railway links and energy infrastructure. Highlighting the success of the first National Investment and Infrastructure Fund (NIIF) Infrastructure Fund, Prime Minister Modi invited UAE sovereign wealth funds to consider participation in the second Infrastructure Fund, scheduled to be launched in 2026. Both leaders also welcomed the establishment of branches of DP World and First Abu Dhabi Bank (FAB) in GIFT City. They noted that this development reinforces GIFT City’s role as an emerging international financial centre. FAB’s GIFT City branch was described as a “key bridge” connecting Indian companies and investors with global markets across the GCC and MENA regions. The leaders reaffirmed their commitment to cooperation in food security, recognising its strategic importance. They underlined the role of public-private partnerships, innovation and knowledge sharing in building sustainable agricultural systems and ensuring long-term food resilience in line with national priorities. In the space sector, both sides agreed to deepen cooperation and welcomed an understanding to collaborate on a joint initiative aimed at driving commercialisation. The initiative seeks to advance space sciences and technologies and create an integrated space ecosystem with end-to-end infrastructure and a strong industrial base. It aims to support joint India–UAE missions, expand global commercial services, create high-skilled jobs and startups, and strengthen bilateral investment through sustainable business models. Science, technology and innovation were identified as priority areas, especially artificial intelligence and emerging technologies. The leaders welcomed the decision to collaborate on establishing a supercomputing cluster in India and agreed to explore cooperation in setting up data centres. They also directed their teams to examine the possibility of establishing “Digital Embassies” between the two countries under mutually recognised sovereignty arrangements. President Sheikh Mohamed bin Zayed Al Nahyan expressed support for the “AI Impact Summit” to be hosted in India in February 2026. The leaders expressed satisfaction with the strength of the bilateral energy partnership and acknowledged the UAE’s contribution to India’s energy security. They welcomed the signing of a 10-year LNG supply agreement between Hindustan Petroleum Corporation Limited and ADNOC Gas for the delivery of 0.5 million tonnes of LNG per year starting in 2028. They also welcomed the enactment of the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) law, noting that it opens new opportunities for civil nuclear cooperation. Both sides agreed to explore partnerships in advanced nuclear technologies, including large reactors, Small Modular Reactors, nuclear plant operations and nuclear safety. Financial cooperation was further strengthened as the leaders directed their teams to work on interlinking national payment platforms to enable fast, efficient and cost-effective cross-border payments. Cultural and people-to-people ties also received attention. Prime Minister Modi welcomed the UAE’s decision to provide artefacts for the National Maritime Heritage Complex at Lothal. The leaders agreed to establish a “House of India” in Abu Dhabi as a lasting symbol of friendship and to promote youth exchanges to deepen cultural understanding. Education was described as a cornerstone of the partnership. Building on the opening of IIT Delhi and IIM Ahmedabad offshore campuses in the UAE, the leaders encouraged stronger links between educational institutions and greater student exchanges. They also welcomed cooperation on Innovation and Tinkering Labs and efforts to integrate India’s Digilocker with UAE platforms for seamless verification of academic documents. On defence and security, the leaders reaffirmed respect for sovereignty, territorial integrity and strategic autonomy. They acknowledged defence cooperation as a core pillar of the partnership and welcomed recent military exchanges, exercises and the signing of a Letter of Intent towards a Strategic Defence Partnership. Both leaders reiterated their “unequivocal condemnation of terrorism in all its forms and manifestations” and agreed to continue cooperation within the FATF framework to counter terror financing. The leaders recalled the launch of the India–Middle East–Europe Economic Corridor in 2023 and exchanged views on regional and global issues. The UAE expressed support for India’s BRICS Chairmanship in 2026, while India supported the UAE’s co-hosting of the 2026 UN Water Conference. The visit concluded with President Sheikh Mohamed bin Zayed Al Nahyan thanking Prime Minister Narendra Modi for the “warm welcome and gracious hospitality”.