Introduction
Oil trades have sometimes been settled in various currencies like Chinese yuan, Russian ruble, and Indian rupee. However, the idea of “de-dollarization” or moving away from the U.S. dollar to settle trades in other currencies is still far away.
India’s Oil and Gas Minister, Hardeep Singh Puri, expressed his personal view of wanting to transact everything in rupees. However, he believes that the U.S. dollar will remain the dominant currency for international oil market transactions.
Foreign settlement
Indian refiners have started using Chinese yuan to pay for Russian oil imports, as an alternative to the U.S. dollar. This shift comes after Russia was cut off from the SWIFT financial-messaging system and faced sanctions due to its invasion of Ukraine.
China has also shifted to yuan for most of its energy imports from Russia, becoming China’s top crude supplier. Some Indian refiners are also using other currencies like yuan when banks are unwilling to settle trades in dollars.
Part of de-dollarization trend?
The Indian rupee is not yet part of the de-dollarization trend in the oil market. While Puri wishes for the Indian rupee to be a leading global currency, he acknowledges the current dominance of the U.S. dollar and the long journey it would take for the rupee to gain similar prominence.
At the BRICS summit, Brazilian leader Luiz Inácio Lula da Silva mentioned the possibility of a common currency within the bloc, which could offer more payment options and reduce vulnerabilities. However, Puri highlights that international trading and payment arrangements have been in place for a long time.
Overall, Puri believes that it will be a challenging process for the Indian rupee to achieve the same level of prominence as the U.S. dollar.
