In response to the turmoil, sanctions, and the war in Ukraine, India’s oil trade provides the strongest evidence of a shift to other currencies that could be permanent, Reuters reports. The dollar’s supremacy has been questioned at times, but it has continued because of the advantages of using a widely accepted currency for business.
India is the world’s third-largest oil importer, and Russia has become its leading supplier after Europe sanctioned Moscow’s supplies over its attack on Ukraine. After western countries imposed price caps on Russian oil in December, Indian buyers paid for most of the Russian oil in non-dollar currencies, including the UAE dirham and the Russian ruble, banking sources said. We are talking about transactions corresponding to hundreds of millions of dollars.
Some Dubai-based traders and Russian energy companies Gazprom and Rosneft insist on paying in other currencies instead of dollars. Multiple sources with direct knowledge say Russian oil has recently sold above the $60-a-barrel cutoff price.
The European Union, the G7, and Australia agreed at the end of last year to limit the price of Russian oil to prevent Western insurance and transport companies from providing services in the trade of Russian oil, which costs more than 60 dollars.
Searching for an alternative system
Indian importers point out that the government is not asking them to stop buying Russian oil, so they hope to find an alternative payment mechanism in case the existing payment system is blocked. According to data from the SWIFT payment system, the share of dollars in total international payments decreased in January to about 40 percent.
Analysts estimate that Russia’s short-term efforts to replace the dollar with other currencies in the trade do not pose a real threat to Western sanctions. They say the sanctions could undermine Western financial systems if they fail to achieve their goals.
According to Bloomberg, Russian oil and fuel prices are rising for buyers in Asia as the circle of big buyers from China and India expands. That puts pressure on small refineries that consume cheap oil. Traders report that oil and fuel deliveries from Russia have increased in recent weeks. The increased interest of Chinese state-owned and large private companies and the increase in demand in India led to an increase in the price of Russian raw materials.
