BRICS Builds A Multipolar Global Oil Architecture
A new multipolar oil world architecture would require the US-led western coalition to rethink their strategies and policies towards BRICS and the emerging multiplex world order.
If individuals want to run a successful business in today's world, their country needs cheap and reliable energy. It's the foundation of everything we do, from making products to selling services. Without it, we would be unable to compete or innovate. So cheap and reliable energy is so important for the economy and determines what is possible for a given economy. That's why the recent announcement that Iran, Saudi Arabia and UAE are among the 6 nations that were invited to join the BRICS group of emerging economies has captured the attention of observers in the energy sector about the possible impact on the global oil market and the geopolitical architecture of the commodity. The present article delves into 1) how the US and Europe are set to lose their geopolitical leverage in the energy market 2) which will in turn cause the Petrodollar to implode leaving the US and Europe no choice but to adapt to a Multipolar Oil Order.
Rise Of A Multipolar Oil Architecture
The geoeconomic implications for the US and its European vassals that two former enemies, Iran, Saudi Arabia and UAE which are oil producers are to join BRICS are significant and complex. BRICS is an association of five major emerging economies: Brazil, Russia, India, China and South Africa. The group aims to enhance cooperation, trade and investment among its members, as well as to challenge the dominance of the US-led Western order in global affairs.
The BRICS are seen as a counterweight to the US-led Western coalition and a challenger to the US dollar's dominance as the world's reserve currency. One of the main implications of this addition of members joining the BRICS is that they would increase the group's share of global oil production and reserves, giving them more leverage in setting oil prices and influencing energy policies. According to the US Energy Information Administration, Iran, Saudi Arabia and UAE together accounted for about 18% of the world's crude oil production and 28% of the proven oil reserves in 2020. By contrast, the US and its European allies produced about 15% of the global oil output and held only 3% of the reserves.
This means that the US and its European partner’s petrodollar architecture would implode, worsening their largely dependent position on oil imports from the Middle East and other regions, where they will face higher oil prices. For instance, the BRICS will coordinate their production levels to manipulate the market, and create alternative payment systems that bypass the US petrodollar. Such scenarios will undermine the economic stability and security of the US and its allies, as well as their influence in the Middle East and other strategic regions.
Petrodollar’s Historical Context
The petrodollar system, which has been in place since the 1970s, is a geopolitical arrangement that ensures the US dollar's dominance as the global reserve currency and the main medium of exchange for oil transactions. Under this system, oil-exporting countries like Saudi Arabia agree to sell their oil only in US dollars, and to invest their surplus revenues in US Treasury securities, thus providing a steady demand for both the dollar and the US debt.
However, this system has been challenged in recent years by several factors, such as the rise of alternative energy sources, the emergence of new oil producers and consumers, the increasing use of other currencies and payment mechanisms for oil trade, and the growing geopolitical tensions between the US and its rivals, such as China, Russia and Iran. These factors have raised questions about the sustainability and desirability of the petrodollar system, and its implications for the US and its allies.
One of the main implications of a post petrodollar world is the potential loss of the US dollar's status as the global reserve currency, which would reduce its purchasing power and its influence over the global financial system. This would also affect the US's debt market and its ability to finance its large fiscal and trade deficits, and to impose sanctions on other countries. Moreover, a post petrodollar world would expose the US to greater inflationary pressures, as it would have to pay more for its oil imports and face a lower demand for its exports.
Another reality of a post petrodollar world is the systemic transition towards multiplexity and alliances in the Middle East and beyond. The US has relied on its once close ties with Saudi Arabia and other Gulf states to maintain its monolithic presence and interests in the region, as well as to counter Iran's influence. However, as these countries decide to diversify their oil sales and investments away from the US dollar, they may also seek to diversify their political and security partnerships, and to pursue more independent and profitable foreign policies. This could lead to more commerce in the region, as well as to new alignments with other powers, such as China, Russia, India or Turkey.
A post petrodollar world would also have significant implications for Europe, which is both a major oil consumer and a key ally of the US. The European Union would face greater challenges in maintaining its cohesion and security, as it would have to deal with more uncertainty and volatility in the global economy and geopolitics, as well as with possible divergences among its members on how to respond to these changes.
This heavily implies that the US and its European allies will face increased competition and pressure from BRICS in the energy sector, especially in the Middle East and Africa. Iran, Saudi Arabia and UAE are among the world's largest oil exporters and have substantial influence over the global oil market. By joining BRICS, they would gain access to alternative markets, financing and technology from China, Russia and other members. They would also be able to diversify their economic and political partnerships, reducing their dependence on the US and its sanctions regime.
Another implication is that the US and its European allies would have to deal with a more assertive and unified BRICS bloc in the international arena, particularly on issues related to regional security, democratic security, and neutralizing sanctions. BRICS has been vocal in criticizing the US-led interventions and sanctions in countries of the Global South like Iraq, Libya, Syria, Iran, Nicaragua and Venezuela. It has also advocated for a more democratic and inclusive and non-intrusive global governance system that reflects the interests and aspirations of developing countries. Thus expanding its membership to include more influential actors from the Middle East, BRICS has strengthened its geoeconomic might while neutralizing the petrodollar leverage in global affairs.
In conclusion, the accession of Iran, Saudi Arabia and UAE to BRICS shall have profound geoeconomic implications for the US and its European vassals. It would pose new challenges and opportunities for them in terms of energy security, economic cooperation and geopolitical rivalry. A new multipolar oil world architecture would also require the US-led western coalition to rethink their strategies and policies towards BRICS and the emerging multipolar world order.