- India has been buying Russian oil trade with non-dollar currencies like the ruble, Reuters reported.
- That erodes the dollar’s dominance as commodities deals are typically done with the greenback.
- India’s shift came after the West imposed new sanctions on Russian oil in December.
Western sanctions have weakened the dollar’s dominance in oil trades, as India increasingly buys Russian oil using other currencies, Reuters reported.
Since the European Union banned imports of Russian crude in December and joined the G-7 in setting a price cap, India has settled most of its Russian oil deals in non-dollar currencies, such as the UAE’s dirham and the ruble, sources told Reuters. In the past three months, these transactions equated to hundreds of millions of dollars.
Some Dubai-based traders as well as Russian energy giants Gazprom and Rosneft are seeking non-dollar payments for certain grades of Russian oil that are selling above the West’s $60-a-barrel price cap, according to Reuters.
But further use of dirhams may soon prove challenging, as the US and Britain added sanctions against Abu Dhabi-based Russian bank MTS, which has been carrying out some of the non-dollar trades. Three Indian banks have also been facilitating such transactions, the report said.
Still, India is now the third-biggest importer of Russian oil, and traders will likely keep looking for ways to maintain flows.
“Russian suppliers will find some other bank for receiving payments,” a source told Reuters. “As it is, the government is not asking us to stop buying Russian oil.”
While the dollar is set to remain the most widely used currency in international trade, other efforts to weaken its status have been emerging.
For example, Brazil and Argentina are seeking a shared currency, while Russia and Iran are at work creating a gold-backed stablecoin.
And tensions between the US and China are also eroding dollar dominance, as Beijing looks to elevate the status of the yuan internationally.