Key Points:
- The initial oil transaction between India and the UAE was settled in Indian rupees instead of US dollars.
- This action aligns with BRICS’s objective of decreasing the dollar’s global hegemonic role.
- By avoiding the dollar, BRICS hopes to exert more influence on international trade.
The UAE has received India’s first-ever rupee payment for a crude oil shipment. The historic rupee payment reflects the two countries’ joint efforts to conduct trade in local currency and comes soon before the BRICS conference.
Rupee Oil Purchase Cements India-UAE Pact
Oil worth millions of barrels was reportedly acquired by India’s largest refiner, Indian Oil Corporation, from the United Arab Emirates national oil corporation, ADNOC, in Indian rupees rather than American dollars. A historic bilateral deal between India and the UAE was reached in July, enabling trade settlement in both countries’ currencies.
India can save money on currency exchanges and have more say over its finances if it stops dealing in dollars. The move is consistent with BRICS’s overarching objective of decreasing reliance on the US currency in international commerce and energy purchases.
The exchange of rupees for oil exemplifies the growing economic connections between India and the United Arab Emirates. Further use of the rupee in energy settlements becomes likely as bilateral commerce between India and the UAE reaches $84.5 billion between 2022 and 2023.
The Move Reflects BRICS’ Ambitions to Bypass Dollar
India’s economic ties with the other BRICS countries, including Russia, China, Brazil, and South Africa, have grown substantially over the past few years. The energy and commercial demands of the bloc are enormous since its members comprise more than 43 percent of the world’s population and 31.5% of the global GDP.
By transacting in local currencies, BRICS countries can sidestep the dollar system and the sanctions imposed by the West. Settlement in rupees, rubles, and yuan offers an attractive alternative for big oil exporters like Russia and Arab states.
The dollar’s coercive power is already weakening after the BRICS countries’ decision to conduct some of their vast energy trade in local currencies. The dollar’s influence can weaken if more countries switch to trading in local currencies such as the rupee, the yuan, or the ruble.
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