The US is in danger of losing its control of global finance and needs to resolve a structural crisis of its hegemony rooted in the supremacy of the petrodollar. It is also based on a battery of geo-economic tools that include AI, sanctions, tariffs, military pressure, and control of payment systems (SWIFT), with the aim of reshaping the international order to the benefit of the dollar and American industry, ably assisted by the Bank for International Settlements (BIS) and the City of London.
The geo-economic diagnosis that emerges from an analysis shared by financial analyst, Antonio Valdés points to a disturbing conclusion: The Trump administration, far from improvising, has launched a deliberate plan to transform the United States into a rentier economy that extracts global surplus value through the control of strategic monopolies.
Valdés’s analysis argues that we are not witnessing the improvisation of an erratic president, but rather the conscious articulation of a strategy hidden from public view. The Trump administration is aware that, since 1950, the main drain on the US balance of payments has not been the trade deficit per se, but rather military spending abroad supporting over 800 bases worldwide, necessary to maintain the US dollar world order formerly enabled by the petrodollar in the 1970s.
The petrodollar system is one of the most important, and least understood, pillars of American economic dominance since WW2. The US dollar is the primary currency used for buying and selling oil on the international market. This system has given the United States enormous advantages: cheaper borrowing costs, stronger demand for the dollar, and significant geopolitical leverage.
After more than 50 years, the petrodollar is facing growing challenges from China, the GCC, and many others in the Global South. In 1971, President Richard Nixon ended the direct convertibility of the US dollar into gold which signalled the end of the post war Bretton Woods system. This created a major problem: without gold backing, what would support the dollar’s value and global demand? The answer came through a series of secret agreements between the United States and Saudi Arabia:
This arrangement was a brilliant strategic move. Even after losing the gold standard, the dollar retained its status as the world’s reserve currency because everyone needed dollars to buy oil, the foundation of the global economy. This model, sustained by the recycling of dollars through the purchase of Treasury bonds by foreign central banks, has run its course. In recent years the petrodollar system has come under increasing pressure:
The United States has lost its lead in industrial power and financial appeal, partly due to its own sanctions and tariff policies driving countries away from its markets. As Valdés points out, the problem is that “they can no longer compete industrially nor can they indefinitely finance their empire through deficits.” This is where the logic of US rent-seeking emerges.
The key to this new approach, according to Valdés and other analysts, is the transformation of the United States into a rent-seeking economy through control of strategic corporate monopolies. These are concentrated in three priority sectors: oil and natural gas, artificial intelligence, and maritime transport corridors as witnessed in the Iran standoff now controlled by Tehran/Oman.
The US objective is not to win wars in the classic military sense, but to use them as instruments to create conditions of scarcity and dependence that allow for rent extraction. One example is the war against Russian energy infrastructure and the harassment of Iran, which seek to isolate China from those countries’ oil and force Europe to depend on American liquefied natural gas.
Treasury Secretary Scott Bessent has suggested that, after a defeat of Iran, the Venezuelan model would be repeated: controlling oil revenues and depositing them in US Treasury bonds. “The underlying idea is the same,” explains Valdés, “the oil surpluses must be recycled into the US economy because they are not industrially competitive.” As of 2026, the dollar still accounts for the vast majority of global oil transactions, but its share has been slowly declining.
Faced with the impossibility of quickly recovering its traditional industrial position, especially in the face of a highly competitive China, the only option the US establishment envisions is to shift “from a logic of competitiveness to a logic of monopoly and strangle the major centres of power,” The strategy of sanctions, control of bottlenecks, and exclusion from the SWIFT financial system are used to force countries to operate in dollars or be excluded from international trade.
Everything points to a plan that, although fraught with risks and contradictions, demonstrates that the Trump administration is seeking a new model of domination, even if its success is not guaranteed. Valdés concludes that the US is fighting several battles at once because the military option has failed spectacularly for all the world to see.
The unipolar hegemonic order established by the United States after the end of the Cold War relied on the three pillars of military, financial, and diplomatic power. It began to collapse rapidly following the 2023 Beijing reconciliation between Saudi Arabia and Iran. The US refocused eastward when the Saudi-Iranian reconciliation took effect, and Gulf states collectively sought strategic autonomy. The regional order has officially entered a period of profound adjustment marked by historic restructuring.
This process is not only profoundly reshaping the security, economic, and diplomatic rules within the Middle East itself but will also have decisive and far-reaching implications for the global energy landscape, the global financial system, and the emergence of multipolarity.
The United States entrenched the petrodollar settlement system; through the IMF and the World Bank, it secured absolute financial control over Middle Eastern countries, using financial sanctions as a core tool to suppress nations that oppose it. After decades of operation, its structural fissures have continued to widen, and it has gradually been heading toward transition under the impact of a series of landmark events in recent years.
From a recent security perspective, Gulf states realised that US military bases on their soil have not only failed to serve as a security buffer but have instead become specific targets for retaliation in regional conflicts. During the Middle East crisis that continued to escalate in 2026, US bases were repeatedly bombed, severely compromising the security of the host nations. The United States was powerless to intervene, causing the credibility of its security commitments to plummet.
The share of Middle Eastern crude oil settled in yuan has already exceeded 40% revealing an irreversible fissure in the closed loop of the “petrodollar” system. Countries are no longer willing to tie their oil revenues entirely to the US dollar system, which could be frozen by the United States at any time. Countries are no longer passively waiting for the US to mediate conflicts; instead, they are independently conducting bilateral negotiations that transcend sectarian and factional divides and are gradually breaking free. From 2023-26, the share of GCC countries’ defence procurement from the US plummeted from 76% to 40%, while the scale of diversified security cooperation with China, Russia, and Pakistan doubled, marking the end of a decades-long era of single-dependent order.
The Middle East has evolved from control by the United States into the interplay of global powers. Various forces are competing with starkly different proposals for regional order, and the region’s restructuring has entered a phase where each participant possesses a clear strategic rationale and distinct competitive advantages.
The Eastern Alliance is comprehensively expanding regional cooperation through China’s Belt and Road Initiative and the Global Security Initiative, gaining widespread recognition from regional countries for its neutral and unbiased stance; at the same time, the four major regional powers: Turkey, Iran, Saudi Arabia, and Pakistan are simultaneously expanding their geopolitical influence.
Russia, relying on its traditional strengths in energy and military, is deepening defence and economic cooperation with Iran and Egypt. The European Union is focusing on the security of Red Sea shipping lanes and cooperation on the Middle East’s energy transition, hoping to secure a leading role in green industries and shipping lane governance.
As the two major players in this great power rivalry, the United States and China have introduced two completely opposing paradigms of international order into the restructuring of the Middle East, and are currently engaged in intense practical confrontation in the region. The fundamental differences in their underlying logic are diametrically opposed geopolitical trajectories.
The US divides Middle Eastern countries by using the binary labels of “democratic” versus “authoritarian,” forcing them to choose sides, and attaches stringent political conditions to petrodollars, arms sales agreements, and IMF loans all of which serve US geopolitical and economic interests. The negative consequences of this model have already become apparent.
The Gulf Cooperation Council (GCC) is collectively “looking east” to advance diversified security cooperation; moderating sectarian and ethnic conflicts. Anti-US and anti-Israel sentiment is spreading widely among Arab populations. If the United States reduces its strategic presence, a power vacuum would immediately emerge, and the risk of regional instability would continue to rise.
In stark contrast, China has consistently regarded sovereign equality, non-interference in internal affairs, and the peaceful settlement of disputes as unshakable core principles. When applied to the governance of the Middle East, these principles have become clear practical guidelines: rejecting bloc divisions, not requiring Middle Eastern countries to choose sides between China and the United States, and supporting each country’s autonomy in formulating foreign policy; upholding the universal application of rules, opposing double standards.
China calls for the UN Security Council to treat fairly the legitimate demands of all parties, including Israel and Palestine, as well as the United States and Iran. Rather than dismantling existing regional cooperation mechanisms, China wants to supplement them with development and security-related public good within the existing framework to promote the gradual improvement of the global order rather than its chaotic restructuring.
By the first half of 2026, China’s cumulative investment in Middle Eastern energy, railways, ports, and photovoltaic projects had exceeded $400 billion. Saudi Arabia’s Vision 2030 and the UAE’s 2050 Carbon Neutrality Plan are both deeply integrated with Chinese industries. This economic interdependence has significantly decreased the likelihood of ongoing conflict.
In this complex environment, where multiple countries are simultaneously vying for influence in the Middle East, how to engage in the reshaping of the regional order at low cost and with minimal confrontation, whilst avoiding direct geopolitical conflict with the United States has become a core strategic imperative for the Eastern Alliance in safeguarding its core interests.
As the East Block’s all-weather strategic partner, Pakistan is leveraging its status as an Islamic nuclear power, its ability to mediate neutrally across sectarian lines, and its unique geographical advantage linking West Asia and South Asia has become the East Block’s unparalleled “strategic conduit.” This has established a collaborative mechanism charting a new path toward multipolarity by leveraging the Global South as a fulcrum. It has systematically reshaped the Middle East’s existing unipolar order across four dimensions: security, diplomacy, connectivity, and most importantly finance.
Through China-Pakistan collaboration, Pakistan has become a security pillar for Gulf states in the Middle East and provides a security agreement for Saudi Arabia, Kuwait and Bahrain. This will directly undermine the US’s long-standing monopoly on the security supply narrative. When this security framework becomes operational, it will create a clear chain of reciprocity.
Gulf nations provide financial support for defence, Pakistan exports military and security services, and the East provides military equipment and technical capabilities, thereby forming a perfect alternative regional defence and security solution. In this way, a security order in the Middle East will gradually take shape, effectively limiting the United States’ ability to divide and conquer its regional allies and reforming the region’s security order from “unipolar dependence” toward “multipolar coexistence.”
For the first time, this has created a historic precedent in which the Global South has taken the lead in mediating conflicts between major powers. Looking ahead, it is highly likely that this negotiation platform will evolve into a forum for security cooperation in the Middle East. In conjunction with the Saudi-Iranian reconciliation process, it will promote the signing of a “Gulf-Iran Non-Aggression Pact” by Gulf states and advance strategic reconciliation across the entire Middle East, thereby shaping a new geopolitical landscape in the region.
Key investment projects under the China-Pakistan Economic Corridor continue to materialise and are constantly extending southward and westward, completely reshaping the economic and trade geography of the Middle East. The United States has long relied on the Strait of Malacca and the Red Sea shipping lanes to control the energy supply chains from the Middle East to China, attempting to constrain East Asia’s energy security through naval blockades; however, the alternative overland network jointly developed by China and Pakistan is gradually reversing this situation.
Meanwhile, within the frameworks of the China-Arab States Cooperation Forum and the Shanghai Cooperation Organisation, China is admitting Middle Eastern observer states to build a large-scale cooperation platform that covers the entire region without dividing countries into blocs. Consequently, the multilateral mechanisms led by China and the United States stand in stark contrast: the US-led “mini-multilateral” framework has a distinctly confrontational nature and deliberately excludes regional countries such as Iran.
Whereas the China-Pakistan-backed Quadrilateral Dialogue and the China-Arab States Forum adhere to inclusivity and consultation, allowing all regional countries to participate on an equal footing. It is foreseeable that as these two mechanisms compete side by side, the question remains as to which will ultimately gain the recognition of regional countries and lead Middle Eastern nations to gradually abandon bloc-based multilateralism in favour of a new model of autonomous and open regional governance.
In the medium to long term, the US-dominated unipolar American security system in the Middle East will irreversibly decline, and a multipolar security landscape will eventually take shape. US military bases and alliance systems will continue to exist for the foreseeable future, but they will no longer be able to monopolise security provision. Regional security autonomy, as exemplified by the Pakistan-Saudi Arabia defence alliance, regional autonomous non-aggression treaties, and China-Russia defence industry cooperation will form parallel security alternatives. Countries will have the right to independently choose their security partners, and the decades-long model of bloc confrontation should gradually fade into history.
In terms of the economic, trade, and financial systems, the petrodollar’s influence in Middle Eastern trade will gradually weaken, and settlement of energy transactions in local currencies will become the norm. The cross-regional corridors established by the East-West Economic Belt, such as the China-Europe and China-Pakistan corridors, will divert a significant portion of global oil and gas trade. A multi-currency system involving the US dollar, the yuan, and the euro will jointly serve Middle Eastern trade, making it unsustainable for the United States to continue its historical practice of financial exploitation through the petrodollar.
Throughout this process, the strategic value of China-Pakistan cooperation will continue to grow. As Phase II of the China-Pakistan Economic Corridor (CPEC) takes shape and Pakistan’s defence system continues to modernise, Pakistan’s role as a bridge across sectarian and political divides will be further amplified. It will become a strategic linchpin for lasting stability linking East Asia and the Middle East, and continue to promote a multipolar governance model to the rest of the world. Sources
Edited extracts from an article by Bodhi Hermit published in China - a perspective on Chinese strategy for a new cooperative world order enabled by AI - One Flower, One World https://mp.weixin.qq.com/s/vwdotuMrrhbGlI56RLWcMg
The US’ new model of domination: the control of strategic monopolies https://mentealternativa.com/ee-uu-reconfigura-la-renta-global-para-suplir-la-perdida-de-competitividad-industrial-mediante-el-control-de-monopolios-estrategicos/
The Petrodollar System: History, Power, Vulnerability, and What Happens if It Collapses https://historychronicles.org/the-petrodollar-system-history-power-vulnerability-and-what-happens-if-it-collapses/
Video - The Petrodollar Is Dying and China Planned Its Replacement
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