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The Rupee Rises: India’s Bold Move Away from the Dollar in Oil Trade

There’s a financial tide turning in international trade, and India is steering the ship. In an unprecedented move, India’s foremost oil refiner, Indian Oil Corp, swapped the traditionally-used dollar for its native currency, the rupee, to acquire a whopping 1 million barrels of oil from Abu Dhabi National Oil Company.

Usually, the global commodity playground revolves around the dollar. But India, standing as the world’s third-largest oil importer and consumer, decided to switch things up. Just last month, an agreement was forged between India and the UAE that would allow rupees to step in where dollars once reigned, effectively eliminating the extra costs of dollar conversion.

Furthermore, the two nations greenlit a real-time payment mechanism to streamline cross-border financial dealings. Notably, this isn’t India’s only foray into rupee-based trade with the UAE. Following suit, a 25 kg gold transaction between the two nations was also completed in rupees.

But the bigger picture isn’t just about India. It seems the tectonic plates of global financial transactions are shifting, with a significant nudge away from the dollar. This trend, aptly termed ‘de-dollarization’, has accelerated ever since the US introduced financial sanctions on Russia. Powerhouses from the East and the West, from China to Israel and France, have shown interest in veering away from the dollar.

The BRICS countries, encompassing Brazil, Russia, India, China, and South Africa, seem to be leading the charge, advocating for their independent non-dollar currencies. China, not to be left behind, is ardently pushing for the yuan’s international prominence, already securing currency agreements with both Brazil and Argentina.

Stephen Jen, the CEO of Eurizon SLJ Capital, threw in his two cents on the matter, noting the dollar’s share in global reserves plummeted drastically in 2022. The rate? Roughly tenfold the average dip observed over the past two decades.

For entrepreneurs and investors, this trend presents both challenges and opportunities. With the traditional dollar-centric world potentially evolving into a more diversified financial ecosystem, adaptability will be key. One thing’s for sure: the realm of international trade is undergoing an intriguing transformation, and it’s worth keeping an eye on.