China is promoting the use of its yuan as the sole currency for settling iron ore transactions among BRICS nations (20/11). This move mirrors the United States’ introduction of the Petrodollar and represents a new stage in Beijing’s use of commodities as a geopolitical tool.

China’s Role as the World’s Largest Iron Ore Importer

China is not only a major exporter of iron ore but also its largest global importer. Last year, Chinese iron ore exports totaled $2.94 billion, while imports reached $134 billion. Its dominance allows China to set and influence trade terms with BRICS members and other suppliers.

Negotiations with Australia and BRICS Partners

Chinese state-owned buyers are currently negotiating new contracts with suppliers, likely from Australia or other BRICS countries, to settle iron ore payments in yuan. “Contract negotiations are deadlocked because buyers and sellers have yet to agree on pricing and settlement currency,” a Southeast Asia market source told Fastmarkets.

An industry insider in Singapore noted, “This is part of a wider trend, where China wants to promote the use of its yuan in many areas, not just commodities.”

Yuan Strategy Compared to the U.S. Petrodollar

Experts note that China’s strategy is similar to America’s Petrodollar system, established in the early 1970s. The Petrodollar ensured that oil-exporting countries sold crude oil exclusively in U.S. dollars, driving global demand for the currency. This gave the United States significant economic and geopolitical advantages and created a cycle where dollars earned from oil exports were reinvested in U.S. assets.

If the negotiations succeed, China and BRICS members will adopt yuan payments for iron ore, potentially reshaping trade agreements and payment mechanisms.

PHOTO: BRICS BRASIL

This article was created with AI assistance.