RMB: Role in International Energy Trade

Yuan Settlement in Energy Trade: A Structural Shift in Global Energy Finance

Executive Summary

The first quarter of 2026 marked a historic breakthrough for the renminbi (RMB) in global energy trade settlement. For the first time, the yuan surpassed the US dollar as the second-largest currency for Middle Eastern crude oil settlements to China, with RMB-denominated trade exceeding 40% of total energy imports from the region.

Key drivers include: geopolitical realignment following the 2025-2026 Gulf conflict, the operational maturation of China’s CIPS (Cross-Border Interbank Payment System), and the emergence of a preliminary “petroyuan” mechanism.

1. Global Energy Trade Settlement Landscape

2. Country/Region Breakdown

2.1 Russia: The Most Complete Shift

As of late 2025, 99.1% of all bilateral trade between China and Russia was settled in rubles and yuan. Russian Finance Minister Anton Siluanov stated this allows both nations to “completely bypass unfriendly Western financial infrastructure.”

RMB share in energy trade: >90%

Strategic Significance: As China’s largest single crude oil supplier (approximately 2.2 million barrels per day in 2025), Russia’s full transition to yuan settlement provides critical scale for the petroyuan system.

Price advantage: March 2026 global oil price spike – Russian Urals crude delivered to China at approximately 18% discount to Brent benchmark when settled in yuan.

Timeline:

• 2022: Post-Ukraine invasion sanctions trigger initial shift
• 2024: 75% of bilateral trade in rubles/yuan
• Late 2025: 99.1% achieved

2.2 Saudi Arabia: The Cracks in Petrodollar

June 2024: The 50-year petrodollar agreement between Saudi Arabia and the United States expired and was not renewed – a watershed moment in global energy finance.

Latest data (March 2026) :

• Saudi Aramco’s yuan-denominated crude sales to China: 45% of total
• RMB share exceeded USD share for the first time in specific trade flows
• Two major Saudi banks joined CIPS in March 2026

Catalysts:

1. Gulf military escalation (2025-2026) : Heightened risk of dollar-denominated asset freezes or liquidity disruptions
2. China as “safe haven” : Beijing’s neutrality created yuan demand from Gulf sovereign wealth funds
3. Price incentives : 3-5% discounts offered for RMB settlement

2.3 Iran: Passive but Complete Dollar Avoidance

Iran has long accepted yuan for oil sold to China’s independent “teapot” refineries – a practice that has accelerated significantly.

Key developments :

• Iran may be receiving yuan in exchange for passage through the Strait of Hormuz (unconfirmed)
• China’s “Blocking Statute” has been invoked, directing Chinese entities to ignore US sanctions
• May 2026 : Chinese financial regulators quietly instructed major banks to halt new loans to five Iranian refineries under US sanctions – a signal of compliance tightening (reported by South China Morning Post)

Estimated RMB share: >90% (informal sector, includes barter-adjacent arrangements)

2.4 Middle East (Aggregate) & Iraq

Middle East aggregate (March 2026) : RMB share approximately 41% – representing a dramatic surge from 12% in 2023.

Iraq: RMB share estimated at 60%, driven by:

• Iraq’s inclusion in China’s currency swap network (2024)
• Pressure to diversify following Gulf escalation

2.5 India: Small but Symbolic Shift

Indian companies have begun using yuan to pay for some Russian oil purchases. In early 2026, Indian refiners (including Reliance Industries) reportedly settled multiple cargoes of Russian Urals crude in yuan rather than rupees or dirhams.

Estimated share: ~15% (of India’s Russia-sourced oil)

Significance: A notable shift for a country whose bilateral trade with China has historically been settled almost entirely in dollars. This reflects the practical reality that yuan liquidity is now more accessible and stable than alternatives such as the Russian ruble or UAE dirham for large-scale energy payments.

3. CIPS Network Data

CIPS Milestones :

CIPS expansion metrics (2025-2026) :

4. Three Drivers of the “Golden Window”

Analysts have identified a confluence of factors creating what is being called a “golden window of opportunity” for yuan energy trade settlement.

4.1 Geopolitical Conflict as Catalyst

Driver 1: Gulf War Dynamics

The 2025-2026 military escalation in the Gulf region triggered a major behavioral shift. Gulf oil exporters, fearing potential dollar-denominated asset freezes or payment disruptions, urgently sought alternatives. China’s position of strategic neutrality made it a perceived safe haven.

Goldman Sachs estimate: Only approximately 6% of China’s total energy consumption is exposed to potential Hormuz Strait disruption – but the psychological and financial counterparty risk faced by Gulf states has been far higher.

Driver 2: Price Discounts for RMB Settlement

Driver 3: Legal Shield – China’s Blocking Statute

In 2021, China enacted a “Blocking Statute” authorizing Chinese entities to disregard certain foreign sanctions and to sue sanction enforcers. In 2025-2026, this statute was reportedly invoked for the first time in the energy sector, legally validating yuan payments to sanctioned Iranian entities.

Driver 4: CIPS Maturation

As of April 2026, CIPS:

• 1,560 participant institutions across 185 countries
• Processing capacity: >10,000 transactions per second
• Average settlement time: 3-5 seconds (vs SWIFT’s 1-2 days for cross-border)

5. Key Timeline of Events

6. Implications & Outlook

6.1 What This Means for the “Petroyuan”

Three conditions must be met for a durable petroyuan:

1. Large-scale RMB recycling mechanism – Gulf states must have meaningful ways to invest petroyuan proceeds. The China-Gulf free trade agreement (under negotiation) and Shanghai’s gold and oil futures markets are key channels.
2. Price transparency/convergence – Shanghai’s yuan-denominated crude oil futures (INE) must narrow the spread vs Brent and WTI. Current discount: approximately $2-3/barrel.
3. Geopolitical stability in the Gulf – The current momentum is, in part, crisis-driven. De-escalation could slow, though not reverse, the trend.

6.2 Three Scenarios for 2027-2030

6.3 Watchlist Indicators

• June 2024 petrodollar expiration effects continue to ripple through Saudi decision-making.
• China-Gulf free trade agreement: If signed, would formalize RMB energy settlement framework.
• Russian supply stability: Maintains baseline yuan circulation volume.
• Indian payment behavior: Even a small shift creates dollar-reducing cascade effects.
• CIPS-SWIFT interoperability: Any formal linkage would dramatically accelerate yuan adoption.

7. Conclusion & Cautions

The Shift Is Real – But Not Linear

The data show a clear, measurable structural shift in how China pays for its energy imports. However, three important cautions are warranted:

1. Not a collapse of the petrodollar – 54.8% global USD share remains dominant; yuan at 6.8% is a share shift, not a revolution.
2. Crisis-driven momentum can reverse – A de-escalation in the Gulf could slow yuan adoption as dollar liquidity returns.
3. May 2026 banking guidance – Reported instructions to pause loans to Iranian refineries suggest China remains sensitive to US secondary sanctions. The petroyuan’s growth is not frictionless.

Bottom Line

What we are witnessing is the first credible, multi-supplier petroyuan system in history. It is currently supported by geopolitical crisis, price incentives, and infrastructure maturation. Whether it survives peacetime conditions will determine its place in the future global financial architecture.