The Hormuz Yuan Toll: A Spontaneous Mengerian Event

In March 2026, India bought roughly sixty million barrels of Russian crude and paid for it in rupees, deposited into offshore accounts from which the sellers converted the proceeds into UAE dirhams and Chinese yuan. During the active phase of the Iran war, the Iranian government began charging tolls on commercial vessels transiting the Strait of Hormuz, payable in yuan or in digital assets. In June 2024, nearly two years earlier, the United States–Saudi Arabian Joint Commission on Economic Cooperation — the institutional residue of the 1974 understanding that had accompanied dollar pricing of Saudi oil — expired without replacement. ¹

None of these events was announced with great fanfare. There was no BRICS summit resolution. No treaty. No currency union. No new multilateral institution. In every case, individual parties — each acting in their own rational self-interest in the face of a specific set of constraints — chose a medium of exchange other than the U.S. dollar, and the choice propagated without coordination.

This is not geopolitics, strictly speaking. It is Carl Menger's 1892 essay On the Origin of Money, reproduced in the present tense.

What Menger actually said

Menger's monetary theory, compressed into a single sentence, was this: money emerges spontaneously from the individual decisions of traders to accept more saleable goods in exchange for their own less saleable goods, in order to facilitate later exchange for the goods they actually want. There is no designer. There is no authority. There is only the spectrum of saleability — what Menger called Absatzfähigkeit — along which goods are ranked by how easily and on what terms they can be resold.

The critical line, from Section III of the essay: "The theory of money necessarily presupposes a theory of the saleableness of goods." ² Every analysis of money that skips the saleability step is dealing in accounting identities rather than economic causes.

Menger identified the characteristics that confer high saleability: the extent and intensity of demand, the quantity available against that demand, divisibility, durability, transportability, homogeneity, and the limits imposed politically and socially upon exchange. That last category is the opening this framework takes up and extends. Menger wrote about legal and customary restrictions on trade; he did not write about the risk that a monetary good will be confiscated or politically weaponized between the moment of acceptance and the moment of later use. The extension is the framework's, not his, and everything below depends on it. When a previously-dominant monetary good fails one or more of these criteria for a given market participant, that participant is pushed by simple rationality toward the next-most-saleable alternative that satisfies their constraints. If enough participants are pushed at the same time by the same constraint, the monetary regime itself begins to shift. Not by legislation. By arithmetic.

Menger was emphatic on this final point, in the essay's Section IX: "Money has not been generated by law. In its origin it is a social, and not a state institution." ² Governments can ratify what has already happened. They cannot manufacture saleability.

What made the dollar the most saleable good

The post-1974 petrodollar system worked because it stacked Mengerian saleability criteria on top of the dollar:

• Widespread demand, because every nation needed oil and every oil transaction required dollars.
• Divisibility and homogeneity, through the standardized instruments of the U.S. Treasury market.
• Durability, through the largest, deepest, and most liquid sovereign bond market on earth.
• Transportability, through the infrastructure of SWIFT, correspondent banking, and the eurodollar market.
• Absence of weaponization risk, because the dollar was understood to clear transactions without regard to the political disposition of either counterparty.

Only the last of these has changed. And it has changed decisively.

The February 2022 freeze of roughly $300 billion in Russian central-bank reserves — some $210 billion of it in Europe, most of that immobilized at Euroclear in Belgium ³ — was the pivotal event. It demonstrated to every central banker in the world that dollar reserves — previously the highest-saleability asset on the planet for a sovereign — could be rendered un-saleable overnight by an executive decision in Washington that the holder had no vote in. The saleability of the dollar, in Menger's sense, became a conditional function of the holder's political alignment. For aligned holders, it was unchanged. For non-aligned holders, the saleability had quietly collapsed.

The aligned holders are irrelevant to the question of monetary evolution, because they were never going to diversify. The non-aligned holders are everyone who matters. And they began — without coordination, without announcements, without treaties — to do exactly what Menger said they would do: trade down the saleability curve for alternatives that, while inferior to the pre-2022 dollar, were superior to the post-2022 dollar under their specific constraints.

The three 2026 data points

Consider the three events of 2024–2026 in the light of Menger's framework.

Saudi Arabia, June 2024: What lapsed on June 9, 2024 was the United States–Saudi Arabian Joint Commission on Economic Cooperation, constituted in June 1974 and allowed to expire without replacement. It is worth being exact about this, because a widely circulated account holds that a fifty-year agreement obliging the Saudis to price oil in dollars expired that day, and no such agreement has ever been shown to exist. The Government Accountability Office has found no formal dollar-pricing commitment in the 1974 arrangements; what the record supports is an informal understanding, reported years later, that Saudi oil would be sold for dollars in exchange for Treasury purchases and American security guarantees. Nor did dollar pricing stop: Aramco still publishes its official selling prices in dollars every month, and no yuan-denominated Saudi crude sales have been confirmed. ⁴ What expired was the institutional scaffolding, not the practice. The Mengerian reading is the narrower one, and it survives the correction: the arrangement was never a treaty, which is precisely why nothing had to be announced when its formal apparatus was quietly allowed to die. Dollar pricing now rests on habit and convenience rather than on any commitment — and habit is exactly the thing that saleability calculations revise.

India, March 2026: Roughly sixty million barrels of Russian crude bought inside a thirty-day sanctions waiver window — a volume consistent with the two million barrels per day that Russian crude reached in India's March import mix. This is not a symbolic volume. At the prices then prevailing, with Brent moving from the low eighties at the start of March to $110 by the end of it, that flow is worth something on the order of $6 billion, and it is settled outside the dollar. ⁵ The mechanism is worth stating precisely, because it is not a straightforward yuan settlement: Indian refiners pay in rupees into offshore accounts held by the Russian sellers, who then convert the balances into dirhams or yuan ⁶. The dollar is bypassed at one remove rather than replaced outright. The rationality is straightforward either way: India needs oil, the rupee is the currency India actually has, and the transaction cost of settling this way is now lower than the transaction cost of assembling dollars under the current sanctions regime. No Indian policymaker announced a break with the dollar. No bilateral treaty was required. The transactions simply began to happen because, at the margin, they made sense.

Iran at Hormuz, spring 2026: The wartime yuan toll is the purest Mengerian moment. Iran, facing a dollar system entirely closed to it, exercising physical control over a chokepoint through which roughly a fifth of the world's traded oil passes, chose to price access in yuan. Not in rials (because the rial collapsed in December 2025 ⁷). Not in gold (because gold does not clear at the speed of oil logistics). In yuan — or, at the payer's option, in bitcoin or tether, routed around correspondent banking entirely — because those were the next-most-saleable instruments available to the parties on both sides of the transaction. The yuan leg runs through Kunlun Bank on China's CIPS rails rather than SWIFT. ⁸ The Islamic Republic of Iran is not conducting BRICS monetary strategy. It is a sovereign under maximum constraint, reaching for the next-most-saleable instrument in reach. The result looks like a geopolitical policy. It is actually emergent rationality.

Why this cannot be reversed from Washington

Washington's instinct in response to observations of this kind is to treat them as problems of enforcement: more sanctions, more secondary sanctions, more tariffs, more Treasury auctions to absorb whatever capital is loose. The Mengerian observation is that this instinct is directionally wrong.

A saleability shift operates at the level of individual rational decision. Each trader, each central bank, each oil ministry is making a localized choice to optimize for its specific constraints. There is no central node to attack. There is no spokesperson to sanction. There is no entity that "decided" to challenge the dollar. The phenomenon is diffuse by construction, and the policy levers that Washington has developed over seventy years are all calibrated for a different class of problem — contesting the behavior of specific state actors rather than interdicting an emergent preference shift across millions of independent transactions.

Worse, each additional sanction, each additional round of secondary enforcement, each additional tariff against a non-aligned trading bloc, marginally increases the weaponization risk factor in Menger's saleability calculation for the dollar. The enforcement instinct is self-reinforcing in the wrong direction: it addresses the symptoms of a saleability decline by creating more saleability decline.

This is the structural parallel to Rome's debasement of the denarius, the Byzantine emergence of the solidus as a private-sector reserve asset (eventually crowding out the debased alternatives), and the post-WWII transition from sterling to dollar. None of these transitions was arranged by treaty. Each was the aggregation of millions of individually rational responses to a saleability erosion in the previous regime.

What the dollar still has

This analysis does not predict imminent dollar collapse. It predicts a gradual, probably decades-long erosion of dollar saleability for non-aligned actors, partially offset by deepening saleability within the aligned bloc. The dollar's share of allocated global reserves has fallen from roughly 71% at its 2000 peak to about 57% in the first quarter of 2026, on IMF COFER data. ⁹ That trajectory is real but slow, and it is not monotonic — the share ticked up from 56.4% to 57.1% between the last quarter of 2025 and the first of 2026, largely on exchange-rate valuation effects. ⁹ The dollar is still on one side of 89% of all foreign-exchange trades, on the BIS triennial survey of April 2025. ¹⁰ The U.S. Treasury market remains the deepest and most liquid on earth. U.S. capital markets still provide returns and optionality that no alternative can currently match.

But the trajectory is unmistakable, and it is precisely the trajectory Menger's framework predicts. The dollar is neither collapsing nor invulnerable. It is being quietly, continuously re-evaluated on a transaction-by-transaction basis by participants whose saleability calculations have shifted. The outcome of those re-evaluations, aggregated across trillions of dollars of annual trade flow, is the slow emergence of a multi-polar monetary environment in which the dollar occupies first place but no longer monopolizes saleability.

What this means for policy and for portfolios

The policy implication, if Washington were listening, would be: abandon the enforcement instinct. Every sanction that weaponizes the dollar is a marginal contribution to the saleability decline. Every freeze of foreign reserves teaches the next foreign reserve manager to diversify preemptively. The path to preserving dollar primacy runs through reducing political risk on dollar holdings, not through increasing it. That path is institutionally closed in the current policy environment, which is its own telling datapoint about the trajectory.

The portfolio implication is simpler. In a Mengerian transition, the winners are the instruments that rise in the saleability ranking as the incumbent declines. These are not primarily the political favorites (the yuan is unlikely to displace the dollar in aligned-bloc commerce). They are the politically neutral instruments that become relatively more attractive as the dollar's neutrality erodes: gold, high-grade physical commodities, select hard-asset equities, and — for the first time in monetary history — digitally-native instruments that are architecturally resistant to political intervention. Each of these is a partial reach up the saleability ladder. None is a full replacement. Fekete's own instrument for watching this, in a different context, was the gold basis — the spread between gold futures and cash gold — and it is worth noting that his warning ran the other way from the one usually attributed to him. He wrote about the vanishing of the basis: a secular decline toward zero and into backwardation, signalling that cash gold was being withdrawn from offer rather than that a spread was opening up. ¹¹

The Hormuz yuan toll, read correctly, is not a headline about Iran. It is a datapoint in a long sequence that Menger would have recognized instantly. A monetary good is being demoted by a distributed process of individual re-evaluation. The demotion is proceeding at its own pace, in its own sequence, beyond the reach of any single institution to accelerate or arrest. This is how money has always changed. The surprise in 2026 is not that it is happening. The surprise is how few observers recognize it for what it is.

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Next in this series: a proposal for quantifying the Mengerian saleability spectrum — a decay function of marketability that renders Fekete's gold basis concept into a computable metric applicable across every modern financial instrument.

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Sources

Footnotes

1. Radio Free Asia / Asia Fact Check Lab. "Did a deal between Saudi Arabia and US to sell oil in dollars expire?" 8 July 2024. https://www.rfa.org/english/news/afcl/afcl-us-saudi-oil-deal-07082024043619.html — Rates the fifty-year petrodollar-expiry claim false; quotes a GAO official that the 1974 Joint Commission contained no dollar-pricing agreement. ↩

2. Menger, Carl. "On the Origin of Money." Economic Journal 2, 1892. https://monadnock.net/menger/money.html — Saleableness line from section III; "Money has not been generated by law" opens section IX. Section V carries his actual determinants of saleableness, which do not include confiscation or political weaponisation. ↩ ↩²

3. Congressional Research Service. Russia's War on Ukraine: Financial and Trade Sanctions (IF12062). https://www.everycrsreport.com/reports/IF12062.html — February 2022 immobilisation of roughly $300bn, ~$210bn of it in Europe. ↩

4. S&P Global. "Saudi-China ties and renminbi-based oil trade." https://www.spglobal.com/en/research-insights/special-reports/saudi-china-ties-and-renminbi-based-oil-trade — On the state of yuan-pricing discussions since 2022; Aramco still publishes dollar official selling prices monthly. ↩

5. U.S. Energy Information Administration, Brent spot price. https://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm — For the benchmark's move across March 2026, which sets the value of the transiting flow. ↩

6. Bloomberg reporting on India's rupee-settled Russian crude purchases, summarised at https://news24online.com/india/rupee-yuan-and-dirham-india-paid-for-russian-oil-imports-with-alternate-currencies-says-report-modi-govt-reducing-dependence-on-us-dollar-due-to-iran-war-us-iran-war/784693/ — ~60m barrels in a thirty-day waiver window; refiners pay in rupees, sellers convert to dirhams or yuan. Volume corroborated at https://www.bairdmaritime.com/shipping/tankers/india-increases-russian-crude-imports-to-over-two-million-barrels-per-day; March 2026 Brent path at https://www.eia.gov/todayinenergy/detail.php?id=67424. ↩

7. Iran International. "Iran rial hits new record low of 1.31 million to the dollar." 15 December 2025. https://www.iranintl.com/en/202512153499 — Near 1,420,000 by late December. ↩

8. TRM Labs. "Iranian Crypto Tolls in Strait of Hormuz." https://www.trmlabs.com/resources/blog/iranian-crypto-tolls-in-strait-of-hormuz — Yuan via Kunlun Bank on CIPS, or bitcoin or tether; up to $2m per vessel; regime from mid-March 2026; Management Plan approved 30–31 March 2026. ↩

9. International Monetary Fund, Currency Composition of Official Foreign Exchange Reserves (COFER). https://data.imf.org/en/datasets/IMF.STA:COFER — For the dollar's allocated share at its 2000 peak, its recent level, and the quarter-on-quarter move. ↩ ↩²

10. Bank for International Settlements. OTC foreign exchange turnover in April 2025. https://www.bis.org/statistics/rpfx25_fx.htm — Dollar on one side of 89.2% of trades, $9.6tn daily turnover. Reserve shares from IMF COFER: https://data.imf.org/en/datasets/IMF.STA:COFER. ↩

11. Fekete, Antal E. The Rise and Fall of the Gold Basis. https://www.professorfekete.com/articles/AEFTheRiseAndFallOfTheGoldBasis.pdf — The basis is the nearby futures price less the cash price, with the carrying charge as its upper bound; his warning concerned the vanishing of the basis, not a widening one. See also Backwardation That Shook the World: https://professorfekete.com/articles/AEFBackwardation.pdf. ↩