First Oil Purchase Using Digital Yuan

A Chinese multinational has just made its first-ever purchase of oil using the digital yuan (CBDC). The petrodollar is facing challenges.

Oil and Digital Yuan

Less than a year ago, Chinese President Xi Jinping told the Gulf Cooperation Council that he hoped to soon buy oil from the region in yuan.

A few months later, the Saudi Finance Minister stated at Davos that the kingdom was “open to discussing the payment for its oil in euro or yuan.”

Today, the Chinese oil company PetroChina has conducted the first transaction using the e-CNY (digital yuan) via the Shanghai Petroleum and Natural Gas Exchange. A shipment of one million barrels of crude oil was purchased from an undisclosed seller.

The fact that the transaction was carried out in a CBDC provides a clue. Indeed, the Bank of China recently signed a cooperation agreement with the largest bank in the United Arab Emirates, First Abu Dhabi Bank, on the occasion of the Belt and Road Summit.

The Chinese and Emirati central banks also signed an agreement regarding the CBDC. It’s worth noting that they are already collaborating on the Bank for International Settlements’ mBridge project for cross-border payments.

Furthermore, the United Arab Emirates’ CBDC adviser had already mentioned this potential collaboration in 2022. Shu-Pui Li stated that Chinese companies prefer to pay in e-CNY, and UAE companies would be happy to receive them.

In March, the China National Offshore Oil Corporation used the Shanghai Petroleum and Natural Gas Exchange to settle its first gas contract in yuan (not digital). The seller was the French company Total, and the gas came from the United Arab Emirates.

Meanwhile, BRICS member countries have committed to using local currencies more frequently for their trade.

Bit by bit, the world is turning away from the dollar, weary of parking its reserves in U.S. debt. The freezing of $300 billion belonging to Russia has had an impact…