Dollar Dumped? India Bought 1m Barrels Of Oil From UAE Using Rupees Instead Of $

India and the United Arab Emirates (UAE) have embarked on a landmark initiative to conduct trade using their respective local currencies. This transformative development marks a departure from the conventional practice of trading in U.S. dollars and carries potential implications for the role of the U.S. dollar on the global stage.

The recent announcement from the Indian government highlights a significant transaction where the Indian Oil Corp., a leading petroleum refiner, purchased one million barrels of oil from the Abu Dhabi National Oil Company using the Indian rupee instead of the U.S. dollar. This decision signifies a departure from the long-standing norm of conducting such trades in dollars and emphasizes the growing push for trade in local currencies.

This significant shift in trading practices finds further illustration in the sale of 25kg of gold from a UAE gold exporter to an Indian buyer for approximately 128.4 million rupees ($1.54 million). This transaction showcases the growing willingness of countries to explore alternatives to the U.S. dollar in cross-border trade.

India’s initiative to settle global trade in rupees, introduced by its central bank last year, has now taken concrete form through agreements signed with the UAE. By opting to trade in their own currencies, these two economic powerhouses aim to streamline transactions, reduce costs associated with currency conversion, and establish a real-time payment link for seamless cross-border financial transactions.

The underlying sentiment driving such initiatives extends beyond the bilateral relationship between India and the UAE. Many nations, including powerful players like China and Russia, have been actively seeking ways to reduce their dependence on the U.S. dollar. This phenomenon, known as “de-dollarization,” has gained traction as a response to the impact of U.S. sanctions and foreign policy decisions.

It’s important to note that while some have speculated about the decline of the U.S. dollar’s dominance, Treasury Secretary Janet Yellen has indicated that no existing currency is poised to replace the dollar’s global status. Nonetheless, the 8% decrease in the dollar’s share of global reserves in 2022 underscores a growing trend of central banks diversifying their holdings by moving away from dollar reserves in favor of other assets such as gold.

the decision by India and the UAE to engage in bilateral trade using their local currencies represents a significant step toward redefining international trade norms. As more nations explore alternatives to the U.S. dollar, the landscape of global economics is undoubtedly undergoing a transformation. While the dollar’s role as the primary global reserve currency remains prominent, the emergence of initiatives like these highlights the evolving dynamics in the world of finance and trade.