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Donald Trump’s designs on Venezuela and Greenland have sent shock waves around the world. Canadian premier Mark Carney said they have created a “rupture in the world order”, as political alliances that have held for over 80 years are thrown aside.

And as the US seeks to carve out a Western Hemispheric sphere of influence, questions about the dollar’s future as the lynchpin of the global economy are growing louder. Many other parts of the world are switching to green energy sources as renewable energy becomes cheaper than fossil fuels, and countries forced to pay back loans in dollars are eyeing alternative currency options to free themselves from the penalty of fluctuating exchange rates amid unpredictable policy shifts.

As a result, the continued relevance of the petrodollar system – in which oil is traded in dollars and guarantees demand for US currency – may be less than assured.

What is the petrodollar system?

The petrodollar system was established in the 1970s following the collapse of the Bretton Woods system and is one of the most consequential monetary arrangements in modern history.

In 1944, the Bretton Woods agreement made the US dollar the anchor of the global monetary system, pegged to gold and with other currencies fixed to the dollar. The framework aimed to provide global financial stability following the economic fragmentation of the Second World War and cemented the dollar as the world’s reserve currency.

US President Richard Nixon abandoned the gold standard in 1971 to curb inflation after foreign central banks – increasingly reluctant to hold depreciating dollars – began converting their dollar reserves into gold. The petrodollar system emerged as an alternative means of keeping the dollar as the backbone of international transactions.

The petrodollar system refers to the pact that Gulf Cooperation Council (GCC) states – including Kuwait and Saudi Arabia – made with the US, agreeing to price oil in dollars and to recycle revenues into US Treasury securities in return for military protection and sales of advanced weaponry.

    Andrés Arauz, former Ecuadorian minister and central bank director, told Green Central Banking that ramifications for the global economy were immense: “So oil and gas [are traded in dollars], but then also downstream with all the derivatives, but then also all the chemical elements derived from the oil industry and petrochemical industry. And then likewise, upstream with all the technology and inputs required to extract the oil, [it] created a dollar-denominated value chain with global and international repercussions.”

    Arauz also notes that international accounting standards set by institutions like the IMF reinforce the system by requiring central banks and organisations to report reserves in dollars, solidifying the greenback as the default unit of account.

    For decades, this system delivered guaranteed demand for dollars, recycled oil revenues into safe-haven US debt markets, and provided outsized geopolitical leverage to the US Federal Reserve given the need of other countries to accumulate dollars to conduct global transactions.

    Fadhel Kaboub, associate professor in economics at Denison University, explains how this “exorbitant privilege” distorted the global economy in the US’s favour. “All countries operate … within a system where they have to accumulate reserves not in gold anymore but in dollars and countries that have debt, their debt is denominated in dollars. So that created a locked-in system that gives the US dollar a privilege as the dominant payment system and gives the opportunity to weaponise this system.”

    The petrodollar system has also encouraged and amplified US consumption of fossil fuels and its contribution to greenhouse gas emissions. Kaboub, who is also a member of the United Nations High-Level Advisory Board on Economic and Social Affairs, says the system has “rewired” the global economy into an extractive model that promotes environmentally destructive industries.

    But as decarbonisation accelerates and renewable energy displaces fossil fuel value chains, the petro-lynchpin of dollar dominance faces unprecedented strain.

    Is the petrodollar in decline?

    Signs of discontent are increasing, placing the dollar’s decades-long dominance under unprecedented pressure.

    BRICS countries are discussing new financial mechanisms that will make trading within the bloc easier but may also reduce reliance on existing dollar-dominated channels. Both India and Brazil have denied that linking BRICS digital currencies is part of moves towards de-dollarisation, but such a move will likely cause concern in the US.

    Meanwhile, European Central Bank President Christine Lagarde made headlines in May 2025 with her blunt assessment that the current global landscape presents a significant opportunity for a “global euro moment”, as investors “unsettled by unpredictable US economic strategies” increasingly reduce their exposure to dollar-denominated assets.

    These developments reflect deeper structural shifts. The dollar’s share of global reserves has declined from 71% to 56.3% since 2008, with central banks purchasing over 1,000 metric tons of gold annually for three consecutive years. China slashed its US Treasury holdings from US$1.3tn in 2013 to just $682bn by November 2025, while simultaneously expanding yuan-based trade across Asia.

    Africa records fastest-ever solar growth, as installations jump in 2025

    This shift was triggered by what Arauz describes as “eroding trust” in US financial systems.

    “Perhaps the most serious element that has accelerated this diversification has been the weaponisation of the hegemonic banking system,” Arauz said. “[Through] sanctions, through asset freezes, through confiscation of international reserves in many countries … [these] have definitely stirred things up and made countries reflect about the reliance on this previously thought of neutral system that is now, on the other hand a threat, to their national sovereignty and economic policies.”

    The climate crisis is also acting as a catalyst. As the world transitions away from fossil fuels, structural strain is placed on the demand for dollars, and the more the US clings to fossil fuel dependency in order to maintain monetary dominance, the deeper the cracks become.

    Gulf states have long-term plans to diversify away from oil and reinvest a substantial portion of their oil revenues in green value chains, challenging the core pact which upholds the petrodollar system that US currency dominance has long depended on.

    And while economists expect the dollar to remain the primary reserve currency in the near term, it has also been noted that once transitions to a new system are underway, they can happen very quickly. Speaking at the World Economic Forum in Davos in January, Jeffry Frieden, political science professor at Columbia University, warned of “an erosion of confidence in the dollar” amid mounting doubts about the safety of US Treasuries as “the most important financial asset in the world”.

    ‘US pulling itself out of the picture’

    The Trump administration’s response to a shift away from the dollar has been to double down on arms sales and fossil fuel infrastructure – what Kaboub calls a “long-term strategic failure” that fundamentally misreads the changing dynamics of global power.

    Trump’s recent $142bn arms deal with Saudi Arabia aims to tether Gulf revenues to the dollar through military exports. However, economists like Maya Senussi at Oxford Economics and John Sfakianakis of the Gulf Research Centre warn that financing such deals alongside decarbonisation projects will strain GCC budgets, and Bloomberg estimates it will require oil prices to be at least $96 a barrel just to break even. Brent oil prices currently hover around $67-68.

    And in the Global South, higher oil prices may inadvertently threaten dollar dominance by exacerbating debt burdens by increasing repayment costs, pushing countries towards cheaper (and greener) energy systems. America’s transition to net fossil fuel exporter status means higher oil prices now strengthen rather than weaken the dollar, creating a triple blow for dollar-indebted countries in Latin America and Africa: higher energy costs, escalating debt servicing and constrained fiscal space.

    The very mechanism designed to strengthen dollar ties – expensive arms deals premised on elevated oil prices – accelerates the search for alternatives among countries holding critical transition minerals like lithium, copper and cobalt. This pushes the US further from the green value chains of the future.

    “The US is pulling itself out of the picture, it’s divesting from the green technologies and green industries. Which means it’s moving away from its interest in critical minerals,” says Kaboub. “So the remaining big player is China, and it’s a friend of the Global South.”

    Today, China controls 85-90% of global rare earth processing and offers renewable energy equipment that remains attractive to the GCC despite US and EU tariffs. This is thanks to competitive pricing and comprehensive infrastructure approaches that western competitors have largely failed to match.

    ‘America needs you’: US seeks trade alliance to break China’s critical mineral dominance

    Kaboub says that Trump’s minerals-for-security deals, such as in Greenland and elsewhere, may secure short-term market access but erode global trust in US foreign policy, a cornerstone of confidence in the dollar. “The isolated backwards technology bloc is going to be the United States,” he says.

    As Lagarde observed, investors increasingly seek “geopolitical assurance in another form” by directing investments toward regions perceived as “dependable security allies” – but this no longer automatically defaults to the US as its government criticises its one-time allies and jeopardises the future of NATO.

    Yet the petrodollar system faces challenges that extend far beyond the geopolitics of sanctions; climate change has introduced structural pressures making the core foundations of dollar dominance increasingly untenable.

    However, given Trump’s bellicose stance on Venezuela and Greenland, there is a risk that American policymakers will not recognise this new reality until it is too late.

    This article was originally published by Green Central Banking.

    The post Explainer: What is the petrodollar and why is it under pressure? appeared first on Climate Home News.

    Explainer: What is the petrodollar and why is it under pressure?

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    Indigenous groups warn Amazon oil expansion tests fossil fuel phase-out coalition

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    Indigenous leaders from across the Amazon have warned that stopping the expansion of oil drilling into their territories will be a crucial test for a growing international coalition committed to transitioning away from fossil fuels.

    As 60 countries discussed at a landmark conference in Santa Marta, Colombia, pathways to end the world’s reliance on fossil fuels, Indigenous groups said the process risks losing credibility if governments continue opening new oil frontiers in the Amazon.

    Their central demand was the establishment of fossil fuel “exclusion zones” across Indigenous territories and biodiverse areas of the rainforest, permanently barring new oil and gas expansion in one of the world’s most critical ecosystems. Indigenous representatives proposed establishing protected “Life Zones”, which they said would provide legal safeguards against governments and companies seeking to expand extraction into their lands.

    But Indigenous delegates left the conference frustrated as the final synthesis report drafted by co-chairs Colombia and the Netherlands failed to include the proposal.

    In a statement at the end of the conference, Patricia Suárez, from the Organization of Indigenous Peoples of the Colombian Amazon (OPIAC), said formally declaring Indigenous territories – especially those inhabited by peoples in voluntary isolation – as exclusion zones for extractive industries was “an urgent measure”.

    “If the heart of the conference does not begin there, it risks remaining a set of good intentions that fails to respond to either science or our Indigenous knowledge systems,” she added.

    Pushing for a new oil frontier

    Campaigners say the pressure on the Amazon is intensifying just as scientists warn the rainforest is nearing irreversible collapse. Around 20% of all newly identified global oil reserves between 2022 and 2024 were discovered in the Amazon basin, fuelling renewed interest from governments and companies seeking to develop the region as the world’s next major oil frontier.

    Ecuador has moved ahead with the auction of new oil blocks in the rainforest, while the country’s right-wing president Daniel Noboa has promoted the region as a “new oil-producing horizon” and backed efforts to expand fracking with support from Chinese companies.

      In Santa Marta, a coalition of seven Indigenous nations from Ecuador issued a declaration condemning the government, which did not participate in the conference.

      “While the world talks about energy transition, our government is pushing for more oil in the Amazon,” said Marcelo Mayancha, president of the Shiwiar nation. “Throughout history, we have always defended our land. That is our home. We will forever defend our territory.”

      Indigenous groups also warned that Peru – another South American nation absent from the conference – plans to auction new oil blocks in the Yavarí-Tapiche Territorial Corridor, a highly sensitive region along the Brazilian border that contains the world’s largest known concentration of Indigenous peoples living in voluntary isolation.

      COP30 host under scrutiny

      Indigenous leaders also criticised Brazil, arguing that despite its international climate leadership, the country is simultaneously advancing major new oil projects in the Amazon region.

      Luene Karipuna, delegate from Brazil’s coalition of Amazon peoples (COIAB), said the oil push threatens the stability of the rainforest. Not far from her home, in the northern state of Amapá, state-run oil giant Petrobras is currently exploring for new offshore oil reserves off the mouth of the Amazon river.

      Brazil participated in the Santa Marta conference and was among the countries that first pushed for discussions on transitioning away from fossil fuels at COP negotiations. Yet the country is also planning one of the largest expansions in oil production in the world, according to last year’s Production Gap report.

      Veteran Brazilian climate scientist Carlos Nobre told Climate Home that the country’s participation at the Santa Marta conference contrasted with its oil and gas production targets. “It does not make any sense for Brazil to continue with any new oil exploration,” he said, and noted that science is clear that no new fossil fuels should be developed to avoid crossing dangerous climate tipping points.

      He added that the Brazilian government faces pressures from economic sectors, since Petrobras is one of the countries top exporting companies. “They look only at the economic value of exporting fossil fuels. Brazil has to change.”

      The COP30 host also promised to draft a voluntary proposal for a global roadmap away from fossil fuels, which is expected to be published before this year’s COP31 summit.

      “In Brazil, that advance has caused so many problems because it overlaps with Indigenous territories. Companies tell us there won’t be an impact, but we see an impact,” Karipuna said. “We feel the Brazilian government has auctioned our land without dialogue.”

      For Karipuna and other Indigenous leaders, establishing exclusion zones across the Amazon is no longer just a regional demand, but a prerequisite to prevent the collapse of the rainforest.

      “That’s the first step for an energy transition that places Indigenous peoples at the centre,” she added.

      The post Indigenous groups warn Amazon oil expansion tests fossil fuel phase-out coalition appeared first on Climate Home News.

      https://www.climatechangenews.com/2026/05/08/indigenous-amazon-oil-expansion-fossil-fuel-phase-out-coalition-santa-marta/

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      Kenya seeks regional coordination to build African mineral value chains

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      African leaders have intensified calls for governments to stop exporting raw minerals and step up efforts to align their policies, share infrastructure and coordinate investment to add value to their resources and bring economic prosperity to the continent.

      In a speech to the inaugural Kenya Mining Investment Conference & Expo in Nairobi this week, Kenyan President William Ruto became the latest African leader to confirm the country will end exports of raw mineral ore. The East African nation has deposits of gold, iron ore and copper and recently launched a tender for global investors to develop a deposit of rare earths, which are used in EV motors and wind turbines, valued at $62 billion.

      Kenya is among more than a dozen African nations that have either banned or imposed export curbs on their mineral resources as they seek to process minerals domestically to boost revenues, create jobs and capture a slice of the industries that are producing high-value clean tech for the energy transition.

        “For too long we have extracted and exported raw materials at the bottom of the value chain, while others have processed, refined, manufactured and captured the greater share of economic value,” Ruto told African ministers and stakeholders gathered at the mining investment conference in Nairobi.

        As a result, Africa currently captures less than 1% of the value generated from global clean energy technologies, he said. To address this, Kenya, in collaboration with other African nations, “will process our minerals here in the continent, we will refine them here and we will manufacture them here”, he added.

        Mineral export restrictions on the rise

        Africa is a major supplier of minerals needed for the global energy transition. The continent holds an estimated 30% of the world’s critical mineral reserves, including lithium, cobalt and copper. The Democratic Republic of Congo produces roughly 70% of global cobalt, a key ingredient in lithium-ion batteries, while countries such as Guinea dominate bauxite production, and Mozambique and Tanzania hold significant graphite deposits.

        But African governments have struggled to attract the investment needed to turn their vast mineral wealth into a green industrial powerhouse. Recently Burundi, Malawi, Nigeria and Zimbabwe are among those that have resorted to banning the export of unrefined minerals to incentivise foreign companies to invest in value addition locally.

        Outdated geological data limits Africa’s push to benefit from its mineral wealth

        This week, Zimbabwe exported its first shipments of lithium sulphate, an intermediate form of processed lithium that can be further refined into battery-grade material, from a mine and processing plant operated by Chinese company Zhejiang Huayou Cobalt.

        After freezing all exports of lithium concentrate – the first stage of processing – earlier this year, the government introduced export quotas and will ban all exports from January 2027.

        Export restrictions on critical raw materials have grown more than five-fold since 2009, found a report by the Organisation for Economic Co-operation and Development (OECD) published this week. In 2024, a more diverse group of countries, including many resource-rich developing economies in Africa and Asia, introduced restrictions, including Sierra Leone, Nigeria and Angola.

        This is “a structural shift in the wrong direction,” Mathias Cormann, the OECD’s secretary-general, told the organisations’ Critical Minerals Forum in Istanbul, Turkey, this week.

        “We understand the motivations: building local industries, managing environmental impacts, capturing greater value domestically. But our research is quite clear. Export restrictions distort investment, reduce volumes and undermine supply security often while delivering limited gains in value added,” he said.

        In-country barriers to success

        Thomas Scurfield, Africa senior economic analyst at the Natural Resource Governance Institute, told Climate Home News that export restrictions “can look like a promising route to local value addition” for cash-strapped African mineral producers but have “rarely worked” unless countries already have reliable energy, infrastructure and competitive costs for processing.

        “Without those conditions, bans may simply push companies to scale back mining rather than scale up processing,” he said.

        Alaka Lugonzo, partnerships lead for Africa at Global Witness, identified gaps in practical skills and infrastructure as other major barriers. “You need engineers, geologists, marketers,” Lugonzo said, warning that graduates are increasingly unable to match the pace of industry change.

        On infrastructure, she said that plentiful and stable energy supplies are vital and while Kenya has relatively robust road networks, they are insufficient for industrial-scale operations.

        “Meaningful value addition and real industrialisation requires heavy machinery… and you will need better infrastructure,” she said, highlighting persistent last-mile challenges in mining regions where “there’s no railway, there’s no electricity, there’s no water”.

        Export capacity is another concern, she said, particularly whether existing port systems could handle increased volumes of processed minerals.

        Regional approach recommended

        Scurfield said that through regional cooperation – including pooling supplies, specialising across different stages of refining and manufacturing, and building larger regional markets – “African countries could overcome many domestic constraints that make going alone difficult”.

        That’s what close to 20 African governments are working to deliver as part of the Africa Minerals Strategy Group, which was set up by African ministers and is dedicated to foster cooperation among African nations to build mineral value chains and better benefit from the energy transition.

        Africa urged to unite on minerals as US strikes bilateral deals

        Nigerian Minister of Solid Minerals Dele Alake, who chairs the group, said “true collaboration” between countries, including aligning mining policies, sharing infrastructure, coordinating investment strategies and promoting trade across the continent, will create the conditions for long-term investments that could turn Africa into “a formidable and competitive force within the global mineral supply chain”.

        “The time has come for Africa to redefine its place within the global mineral economy and that transformation must begin with regional integration and regional cooperation,” he told the mining investment conference in Nairobi.

        Lugonzo of Global Witness agreed, saying that value-addition would benefit from adopting a continental perspective. “Why should Kenya build another smelter when we can export our gold to Tanzania for smelting, and then we use the pipeline through Uganda to take it to the port and we export it?” she asked.

        To facilitate that, there is a need to operationalise the Africa Free Trade Continental Agreement (AFTCA), she added. “That agreement is the only way Africa is going to move from point A to point B.”

        The post Kenya seeks regional coordination to build African mineral value chains appeared first on Climate Home News.

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        Key green shipping talks to be held in late 2026

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        The future of the global shipping industry – and its 3% share of global emissions – will be decided in three weeks of talks in the third quarter of this year, after a decision taken in London on Friday.

        At the International Maritime Organisation (IMO) headquarters this week, governments largely failed to substantively negotiate a controversial set of measures to penalise polluting ships and reward vessels running on clean fuels known as the Net-Zero Framework. The green shipping plan has been aggressively opposed by fossil fuel-producing nations, in particular by the US and Saudi Arabia.

        This week, countries delivered statements outlining their views on the measures in a session that ran from Wednesday into Thursday. Then, late on Friday afternoon, they discussed when to negotiate these measures and what proposals they should discuss.

        After a lengthy debate, which the talks’ chair Harry Conway joked was confusing, governments agreed to hold a week of behind-closed-door talks from 1 September to 4 September and from 23 November to 27 November.

        Following these meetings, which are intended to negotiate disagreements on the NZF and rival watered-down measures proposed by the US and its allies, there will be public talks from November 30 to December 4.

          Last October, talks intended to adopt the NZF provisionally agreed in April 2025 were derailed by the US and Saudi Arabia, who successfully persuaded a majority of countries to vote to postpone the talks by a year.

          Those talks, known as an extraordinary session, are now scheduled to resume on Friday December 4 unless governments decide otherwise in the preceding weeks. While this Friday session will be in the same building with the same participants as the rest of the week’s talks, calling it the extraordinary session is significant as it means the NZF can be voted on.

          Em Fenton, senior director of climate diplomacy at Opportunity Green said that the NZF “has survived but survival is not a victory” and called for it to be adopted later this year “in a way that maintains urgency and ambition, and delivers justice and equity for countries on the frontlines of climate impacts”.

          NZF’s supporters

          The NZF would penalise the owners of particularly polluting ships and use the revenues to fund cleaner fuels, support affected workers and help developing countries manage the transition.

          Many governments – particularly in Europe, the Pacific and some Latin American and African nations – spoke in favour of it this week.

          South Africa said the fund it would create is “the key enabler of a just transition” and its removal would take away predictable revenues from African countries. Vanuatu said that “we are not here to sink the ship but to man it”.

          Australia’s representative called it a “carefully balanced compromise”, as it was provisionally agreed by a large majority after years of negotiations, and warned that failing to adopt it would harm the shipping industry by failing to provide certainty.

          Santa Marta summit kick-starts work on key steps for fossil fuel transition

          Canada’s negotiator said that if it was weakened to appease its critics like the US and Saudi Arabia, this would disappoint those who think it is too weak already like the Pacific islands.

          A large group of mainly big developing countries like Nigeria and Indonesia did not rule out supporting the framework but called for adjustments to help developing countries deal with the changes. Nigeria called for developing countries to be given more time to implement the measures, a minimum share of the fund’s revenues and discounts for ships bringing them food and energy.

          According to analysis from the University of College London’s Energy Institute, the countries speaking in support of the NZF include five countries which voted with the US to postpone talks in October and a further ten countries which did not take a clear position at that time. Most governments support the NZF as the basis for further talks, the institute said.

          Opposition remains

          But a small group of mainly oil-producing nations said they are opposed to any financial penalties for particularly polluting ships.

          They support a proposal submitted by Liberia, Argentina and Panama which has proposed weakening emission targets and ditching any funding mechanism for the framework involving “direct revenue collection and disbursement”.

          Argentina argued that the NZF would harm countries which are far from their export markets and said concerns over that cannot be solved “by magic with guidelines”. They added that, as a result, the NZF itself needs to be fundamentally re-negotiated.

          The UCL Energy Institute said that just 24 countries – less than a quarter of those who spoke – said they supported Argentina’s proposal.

          While this week’s talks did not see the kind of US threats reported in October, their delegation did leave personalised flyers on every delegate’s desk which were described by academics, negotiators and climate campaigners as misleading.

          One witness told Climate Home News that junior US delegates arrived early on Wednesday and placed flyers behind governments’ name plates warning each country of the costs they would incur if the NZF is adopted.

          The figures on a selection of leaflets seen by Climate Home News ranged from $100 million for Panama to $3.5 billion for the Netherlands. “They are trying to scare countries away from supporting climate action with one-sided information”, one negotiator told Climate Home News.

          A flyer left on Pakistan’s desk, shared by a witness with Climate Home News

          They added that the calculations, by the US State Department’s Office of the Chief Economist, ignore the fact that the money raised would be shared to help poorer countries’ transition as well as ignoring the economic costs of failing to address climate change.

          Tristan Smith, an academic representing the Institute of Marine Engineering, Science and Technology, told the meeting that the calculations were “opaque” and flawed as they overstate the contribution of fuel cost to trade costs.

          A US State Department Spokesperson said in a statement that they “firmly stand behind our estimates” which were shared “in good faith” and to “provide an additional tool to policymakers as they contemplate the true economic burden over the NZF”.

          The post Key green shipping talks to be held in late 2026 appeared first on Climate Home News.

          https://www.climatechangenews.com/2026/05/01/key-green-shipping-talks-to-be-held-in-late-2026/

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