The rumor had been circulating for some time. Russia has finally decided to no longer accept the Indian rupee as payment for its oil. The agreement between India and the Emirates could, however, help solve the problem.
Rupee, niet
Faced with the Western embargo on Russian oil, India jumped at the chance to fill its reservoirs at a dirt cheap price. With all the more enthusiasm that Moscow has made the effort to accept the rupee in payment.
Imports from Russia have since increased significantly, amounting to $51.3 billion since February 2022.
Another proof of the economic rapprochement of the two giants, India now uses the Russian financial messaging system (SFPS : the Russian equivalent of the SWIFT network). This April decision allows the acceptance of Indian Ru-Pay cards in Russia and Russian MIR cards in India.
Unfortunately, the Indian subcontinent does not produce much of interest to Russia. New Delhi mainly exports pharmaceutical products. So much so that the billions of rupees accumulated by the Russian central bank have become a burden.
According to Reuters, months of negotiations have failed to convince Moscow to keep rupees in reserve. Russia now wants to be paid in yuan or dirhams.
Indeed, China builds a number of products that Russians love (Smartphones, PCs, etc.). The currency of the United Arab Emirates (dirhams) is widely accepted around the world since the Emirate sells a universal product: oil.
An agreement between India and the Emirates to unblock the situation?
India signed an agreement with the United Arab Emirates this weekend. The two nations will now settle their trade in rupees rather than dollars.
Indian Prime Minister Narendra Modi visited the United Arab Emirates in person on Saturday. It was also an opportunity to set up a new payment system aimed at facilitating cross-border money transfers.
Bilateral trade between the two countries amounted to $84.5 billion between April 2022 and March 2023. That’s huge.
The reason being that Indians represent nearly 40% of the population of the Emirates (3.8 million Indians). 99% of workers in the Emirates are foreigners. Oil for labor.
The possibility of exchanging rupees against dirhams in large quantities could allow India to continue to buy Russian oil.
For example, Russia will be able to use these dirhams to buy Chinese products. China imports about 40 billion dollars of Emirati oil.
It remains to be seen whether the Emirates will be able to resist Western pressure. Probably. The emancipation of the Gulf countries vis-à-vis the petrodollar is indeed palpable.
The recent meeting between the Russian Foreign Minister and his counterparts in the Gulf Cooperation Council has surely given courage to the latter.
Be that as it may, this agreement is a new blow for the dollar which is in distress, at its lowest for more than a year.
The BRICS meeting in August is likely to be exciting as it will discuss a new international reserve currency.
Using Bitcoin would save you a lot of headaches. Especially for China, which does not seem to want the yuan (and therefore its debt) to become an international reserve currency.
Receive a digest of news in the world of cryptocurrencies by subscribing to our new service of daily and weekly so you don’t miss any of the essential Tremplin.io!
