In a potential uprising, India has taken a significant step towards reducing the dollar’s influence on global trade.
The United Arab Emirates (UAE) and India have embarked on a new era of trade, conducting transactions in their respective local currencies.
Indian Oil Corp., the nation’s leading petroleum refiner, recently made history by purchasing one million barrels of oil from the Abu Dhabi National Oil Company using Indian rupees, shunning the conventional use of the U.S. dollar.
This groundbreaking transaction follows another noteworthy event where a UAE gold exporter sold 25kg of gold to an Indian buyer for approximately 128.4 million rupees ($1.54 million), signaling the growing momentum towards de-dollarization.
The Implications for the Dollar
The broader implications of these moves are substantial. India had introduced a fresh approach to international trade settlement in rupees last year.
This initiative culminated in two agreements with the UAE, emphasizing trade settlements in local currencies. The objective behind these agreements is twofold: reducing transaction costs and eliminating the need for dollar conversions.
Additionally, a real-time payment link will be established to simplify cross-border money transfers between the two nations.
This endeavor is poised to enhance cross-border transactions and foster deeper economic collaboration, as highlighted by the Reserve Bank of India in an official statement.
Joining the De-Dollarization Trend
India and the UAE are not solitary actors in this trend of reducing reliance on the U.S. dollar. Influential global powers such as China and Russia are equally motivated to challenge the dollar’s supremacy in response to U.S. sanctions and foreign policy maneuvers.
Referred to as “de-dollarization,” this movement has gained substantial traction, leading some to question the dollar’s long-standing dominance.
Despite these concerns, U.S. Treasury Secretary Janet Yellen has asserted that no currency currently possesses the potential to replace the greenback.
Yellen’s confidence comes in the wake of an 8% dip in the dollar’s share of global reserves in 2022. In a bid to diversify their holdings, central banks worldwide have begun reducing their dollar reserves in favor of acquiring gold.
These recent developments between India and the UAE add weight to the ongoing discourse about the dollar’s future as the primary global currency and highlight the growing momentum towards a more diversified financial landscape.