By Elly Jupp, Research Associate, IISS-Middle East
Recent announcements that Iran is accepting yuan (renminbi) and rupees for crude sales to its two biggest clients, China and India, is another sign of an ongoing structural shift in global economic power. As more growth moves to the industrialising economies of Asia and other emerging regions, this geo-economic shift has begun to challenge the US dollar’s status as the world’s primary reserve currency. Although the dollar’s demise is hardly imminent, outgoing World Bank President Robert Zoellick is among those suggesting that a new monetary regime, with multiple reserve currencies, is needed for an increasingly multi-polar world.
The non-dollar payments for Iran’s oil are noteworthy for several reasons. Firstly, the move is a clear sign that Beijing and New Delhi consider their energy needs more important than heeding United States requests to join a boycott of Iran over its nuclear programme. Beijing has much to lose by supporting further action against Iran. The loss of Iranian oil would cause a massive supply shock to the Chinese economy and numerous contracts, worth billions, for energy exploration and refining would be at risk. India values Iran as a gateway to Central Asia and Afghanistan, especially in light of Delhi’s strained relations with Pakistan and China.