Signs of distrust vis-à-vis the dollar are piling up. Particularly in India, where Russian oil is being fought over, even if it means alienating the Empire.
Dirhams rather than rupees
Indian oil refiners now pay the majority of their Russian oil in dirham. The Dubai banks Mashreq Bank and the State Bank of India are in charge.
It is for the Indian banks to ward off possible American sanctions if the price of a barrel of Russian crude were to go back above the ceiling of 60 dollars decreed by the G7.
Indeed, India refuses to cut itself off from precious Russian oil. Indian Energy Minister Hardeep Singh Puri has also wanted to clear on the occasion of the energy week in India:
“We are confident that we will be able to use our market to source wherever we need to, wherever we get favorable terms.”
New Delhi is not unaware either that a disappearance of Russian oil exports would soon cause the price of a barrel to explode.
“Imagine a situation in which Iranian oil is sanctioned, Russia has problems and Venezuela cannot supply its oil. The price per barrel will not rise to 200 dollars, but 480 dollars”said the Indian minister to hammer that it does not matter where the oil comes from, including from Siberia.
According to Reuters, 70% of Russian oil shipments in January were destined for the Asian giant, which has become the main buyer of Russian oil for several months.
Cautious, New Delhi does not use Western shipping companies which are obliged to respect the embargo. Russian crude circulates via a “ghost fleet” of 600 tankers bought by Moscow.
About 400 crude oil transport vessels, or 20% of the world fleet, have switched from traditional trade to Russian trade, can we read on Bloomberg.
Why the Dirham rather than the Indian rupee?
The fact is that Russia exports much more than it imports from India. This imbalance would result in the accumulation of rupees in the balance sheet of the Russian central bank. However, the rupee is a currency that continues to depreciate due to the chronically negative Indian trade balance.
The Dirham is more attractive since it is pegged to the dollar. Furthermore, the UAE maintains a neutral position towards Russia, imposing no sanctions. In addition, the Moscow stock exchange is preparing to accept the dirham, thereby offering investment opportunities to the Emirati sovereign wealth fund.
Indian banks also find their account there to cover their tracks in order to avoid American sanctions. These sanctions would apply if the UAE only accepted dollars from India. But this is not the case.
“The UAE is India’s third-largest trading partner, and our current trade value stands at $88 billion. Might as well do it in local currency [et non en dollar] »India’s ambassador to the UAE said on January 24. “It is very important to derisk trade from geopolitics.”
The same goes for the Minister of Foreign Trade of the United Arab Emirates Thani Al Zeyoudi who revealed a week earlier in Davos that he wanted to stimulate non-oil trade in the local currencies of the two countries.
The Minister had clarified that the trading of oil in the Indian currency was not “not under study”. That said, the latest developments reported by Reuters suggest that this rupee-dirham trade mechanism will indeed buy Russian oil…
And why not finally use bitcoin?
“Russia has become India’s largest oil supplier and has contributed significantly to the country’s energy security”Russian Ambassador to India Denis Alipov told the Indian Council on World Affairs on February 2.
Denis Alipov welcomed the launch of a mechanism for trading in rupees and rubles, but was lamented because Indian banks are “too cautious” to use it.
“It’s fear. Indian banks would like to be safe [de sanctions américaines]. It will take longer for them to realize that this will not harm the Indian banking system”did he declare.
Indian banks prefer to go through Dubai so that they can plausibly deny whether Washington is holding them accountable. Their great fear is to see themselves deprived of the dollar, which amounts to signing their death warrant for an international bank.
Banks remain petrified at the thought of being cut off from the dollar and the SWIFT system. Nevertheless, this burst of energy aimed at circumventing the greenback bodes very well for the bitcoin which is chomping at the bit.
These tedious arrangements to play cat and mouse are symptomatic of the absence of a credible alternative to the dollar in its role as an international currency.
Combined with the Lignthing Network, bitcoin could replace the SWIFT network and the dollar overnight. The aftermarket system is already there, ready to go for 14 years.
It is likely that bitcoin’s volatility will be crippling for all nations (apart from El Salvador). Too risky.
And yet, it must be understood that this volatility is only a reflection of its small size (~400 billion dollars). Gold is favored by central banks because of its supposed stability. But this stability is only due to one thing: the fact that the global stock of gold weighs 10,000 billion dollars.
Bitcoin will not be less stable when it replaces the 11,600 billions of dollars of foreign exchange reserves held by the central banks of exporting countries. In such a scenario, a single bitcoin would be worth $600,000.
In other words, given the current price of a bitcoin and the geopolitical tensions that will not fade any time soon, is El Salvador taking such a big risk?
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