The petrodollar system took shape in the 1970s, sealed by Henry Kissinger. Saudi oil would be sold in dollars, Washington would protect the brutal Saudi monarchy, and Gulf oil profits would flow back into U.S. banks and Treasury bonds, lending money back to Washington.
After President Richard Nixon ended the dollar’s official link to gold in 1971, the United States faced a problem: how to make the world keep accepting dollars that Washington would no longer exchange for gold.
Until 1971, foreign governments could exchange dollars for U.S. gold at $35 an ounce. Nixon ended that promise. Washington stopped paying gold for dollars, but gold still measured the dollar’s value in the world market.
Gold traded at about $4,560 per ounce on April 29, 2026. Measured against gold, the dollar has lost more than 99% of its value since 1971.
That long decline shows the debasement of the U.S. paper dollar against world money. Workers are hit when wages lag behind rising prices, while those who hold wealth in property, commodities and financial assets are usually better protected. Dollar devaluation is part of class rule, not a neutral monetary fact.
Why should the world keep accepting the devalued dollar?
Oil helped answer that problem.
When the dollar fell against gold in the early 1970s — shown by the rising dollar price of gold — oil-producing countries needed more dollars for the same barrel of oil. In 1973, Arab members of OPEC — the Organization of Petroleum Exporting Countries, a bloc of major oil-producing states — cut shipments to the United States and other backers of Israel in the October war. The boycott was real. It showed that these countries had won some room to act. But it did not mean the oil monarchies had broken free from imperialist control. The big U.S. and European oil companies still dominated transport, marketing, refining, technology and finance. They used the crisis to push prices higher, blame Arab producers and tighten their grip over the world oil market.
The higher oil price helped the oil states make up for the dollar’s fall. The whole industrial economy ran on oil — factories, ships, trucks, armies, airlines, farms and power systems all needed it. Since oil still had to be paid for in dollars, every country that needed oil also needed dollars.
The new oil income did not remain under the control of the producing countries. It flowed back through Western banks, Treasury bonds and Wall Street, lending money back to Washington and giving the imperialist banks a new lever over both oil exporters and poorer countries that borrowed those dollars.
That was the petrodollar system.
Oil did not replace gold
Gold still holds the commanding place in the world market. When paper money is doubted, big holders look to gold because gold is not another government’s promise to pay. It is a commodity produced by labor. It cannot be printed by the Federal Reserve.
Oil is different. Oil is essential because factories, ships, trucks, armies, airlines and farms all need energy. But oil is bought and sold like other commodities. It has a price; it does not set the price of everything else. The world market does not measure wheat, steel, wages, debts and currencies in barrels of oil. Oil is not money.
Oil supported the dollar system. Gold remained world money — the universal measure big holders turn to when paper currencies are in crisis.
The dollars moving through Gulf banks, Wall Street and U.S. government debt were not wealth by themselves. They were paper claims on wealth produced by workers — in oil fields, factories, mines, ports, farms and transport systems across the world.
The paper claims piled up in New York. The rising price of gold showed how far the dollar had fallen. As those dollars lost value, prices rose faster than wages and workers’ living standards fell. The burden was put on workers’ backs, even though the value those dollars claimed was produced by workers’ labor worldwide.
After World War II, the United States had the strongest industry, the biggest banks, the main reserve currency, the biggest military with troops stationed across the globe. Its imperialist rivals in Europe and Japan were weakened, indebted or under U.S. occupation. U.S. finance capital used that position to put the capitalist world market under Washington’s command.
That is what put the dollar at the center.
Oil strengthened that system after 1971 because the world needed oil and oil was priced in dollars. Washington held military and financial power over the key Gulf producers.
Dollars for allies, strangulation for enemies
The Federal Reserve has a special way to rush dollars to selected foreign governments during a crisis.
Bankers call these deals “swap lines.” The name hides what happens.
The Fed gives dollars to a foreign central bank. That foreign central bank gives the Fed its own currency in return. The foreign central bank then lends those dollars to banks in its own country that owe dollars and need them fast. Later, the foreign central bank pays the dollars back, and the Fed returns the foreign currency.
No oil is produced. No steel is made. No food is grown. No real wealth is created. The deal gives banks access to dollars so they can keep paying dollar debts and avoid collapse.
These deals are not open to the world.
They go to allied states and major financial centers inside the U.S.-led order. They do not go to countries Washington is trying to strangle.
That is the point.
Washington can hand dollars to governments inside its camp and cut off countries that resist its command. One country gets emergency dollars. Another gets sanctions, seized assets, blocked payments and threats against its ships.
On April 22, Treasury Secretary Scott Bessent told a Senate appropriations subcommittee that “many” Gulf and Asian allies had asked for these emergency dollar deals because of the war on Iran.
The UAE shows how dollar pressure and oil politics now meet. Abu Dhabi was seeking emergency dollar support as the war on Iran shook Gulf markets. Days later, on April 28, it announced it would leave OPEC, freeing itself from Saudi-led production limits. Trump welcomed the move because it weakens OPEC limits and promises more oil outside Saudi control.
Trump is also trying to make the Gulf monarchies pay for the war itself. The White House has said he is considering asking Arab governments to cover Washington’s Iran war expenses. Trump has also floated charging tolls in the Strait of Hormuz, saying the United States should collect because “we’re the winner.” This is the U.S.-Gulf protection-for-oil arrangement stripped bare: Washington creates the war, sells the weapons, controls the sea lanes and then demands payment for “protection.”
Saudi Arabia has opened the door to trade in other currencies, including payments in yuan, and has joined payment projects that could make non-dollar settlement easier. This does not free the Saudi monarchy from U.S. finance capital or the U.S.-led imperialist system. It shows that China’s rise has given the Gulf monarchies more room to maneuver, even while U.S. finance capital still works to keep them inside the dollar system.
The need for these new emergency dollar loans is a sign of weakness. A system that once looked automatic now needs more direct handling by Treasury, the Fed, sanctions offices and the Navy.
U.S. debt keeps rising to pay for wars. Wall Street keeps inflating a stock-market bubble around the shaky promises of the AI oligarchs — data centers, chips, cloud contracts and future profits that may never arrive. When too many paper claims press down on too little real value, Washington reaches for credit and force.
One arm blocks ships, the other blocks payments
Since April 13, the U.S. Navy has blockaded Iranian ports. Stateless tankers in the Gulf are being boarded and redirected. In an April 15 interview, maritime analyst Sal Mercogliano said that by his count, roughly 37 vessels had turned back, stopped, or diverted in response to the U.S. blockade of Iranian ports.
On April 15, Treasury Secretary Scott Bessent confirmed that the U.S. Treasury had sent formal warning letters to two Chinese banks, telling them they could face secondary sanctions for processing payments for Iranian oil. Nine days later, on April 24, the Treasury Department sanctioned Hengli Petrochemical, a private Chinese refinery at the port of Dalian, for buying Iranian crude. It also sanctioned about 40 shipping companies and vessels tied to Iran’s oil trade.
The Navy blocks the oil. Treasury blocks the payment. Together, they try to make every shipper, refinery, insurer, port and bank obey U.S. orders.
The Saudi bargain to sell oil for dollars became one pillar of dollar rule. Pricing oil in dollars helped keep countries tied to the dollar after 1971. Gulf oil profits strengthened U.S. banks and Treasury bonds, lending money back to Washington. But the United States had already lost the unchallenged industrial strength it held after World War II. The dollar system was under pressure from war debt, inflation and rising competition. From 1979 to 1982, the Federal Reserve drove U.S. interest rates sky-high to defend the dollar and pull money back into U.S. financial markets. Countries that had borrowed in dollars faced higher debt payments, IMF-enforced austerity and crisis.
That was U.S. finance capital, backed by state power, forcing the world to live under a paper dollar whose value has kept falling against gold.
The same system is visible today: carrier groups in the Gulf, sanctions on Chinese refineries, blocked Iranian tankers, and emergency dollar loans for Gulf monarchies that host U.S. bases.
A currency cannot be separated from the state that issues it when that state uses warships, banks, courts and sanctions to keep the currency on top.
The system is larger — and more exposed
The dollar system still functions, but its violence is harder to hide. Washington once presented dollar rule as the natural order of the capitalist market: countries needed dollars, banks cleared payments in dollars, oil moved in dollars and central banks held Treasury bonds as reserves. Behind those words stood warships, sanctions, frozen assets and political threats. Now they are out in the open.
The same governments Washington counts on to uphold the dollar order are asking for emergency dollars. Some countries are looking for ways to settle trade outside the dollar. China has built payment routes that give sanctioned countries another path.
Central banks are buying more gold because gold is not another government’s debt. It does not depend on the promise of the U.S. Treasury. It does not sit inside a bank account Washington can freeze.
Gold reappears when trust in paper weakens.
Every new blockade shows that Washington cannot rely on the capitalist market alone. Every new sanctions order punishes countries trying to trade outside its command. Every new emergency dollar loan shows that even allied governments need help staying inside the system.
The dollar is not value. It is a paper claim on value produced by labor around the world.
More openly than before, Washington is using blockades, sanctions, carrier groups and emergency dollar deals to defend those claims for U.S. finance capital.
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