19 March 2023
Reuters reported last Wednesday that “India’s Oil Deals With Russia Dent Decades-Old Dollar Dominance”, which highlighted the growing tendency of those and many other nations using national or or third-party currencies to settle cross border trades thus sidelining the US$ which has dominated international trade since the 1970s.
The dollar was adopted as the primary reserve currency for international trade in 1945, and the petrodollar was established became the medium for oil trades as a result of an agreement in 1971 between the USA and Saudi Arabia.
The growing use of national or third part currencies is something
significant that everyone involved i international trade or finance should pay attention to. We reported in our currency wars feature soon after Russia’s (ahem,) special military operation began that the West’s sanctions, imposed with the aim of destroying the Russian economy, “could erode the dollar’s dominance”. Naturally we were written off as crazy conspiracy theorists for holding such an opinion but ...
Lo and behold, that’s precisely what happened, with India of all countries accelerating de-dollarization through its non-dollar-denominated energy deals with Russia.
Since India decided that supporting US / EU sanctions was not in its best interests, Russia has become India’s largest supplier of oil and over the past year has provided a whopping 35% of that country’s needs. India is also the world’s third-largest oil importer and fifth-largest economy. having recently overtaken the UK to occupy that spot. Their new energy ties, and particularly the growing de-dollarization dimension of their deals thus must have effects all around the world.
This refusal to support sanctions or openly demonstrate support for Ukraine does not signify any anti-American sentiment on India’s part since everything is purely motivated by the pursuit of that country’s objective national interests. Delhi had no choice but to distance itself from dollar-denominated energy trades with Moscow due to Washington’s illegal sanctions on nations that trade with Russia. Its leaders were not going to plunge the world’s most populous country into an economic crisis just to please the Dementia Joe and his whacko administration by eschewing the import of discounted oil from Russia or sacrificing the revenue earned from its exports to Russia.
defying American pressure upon it to unilaterally concede on those
aforementioned objective national interests, India’s economy ended up
growing at twice the pace of China’s, which contributed to catapulting that country to the forefront of the global systemic transition to multipolarity. India is now well placed to establish itself as the de facto leader the Global Global South in helping fellow developing countries balance between U.S. hegemony and the Sino-Russo Entente. However, in spite of claims made by Dementia Joe, Boris Johnson when he was Prme Minister, Emmanuel Macron and leaders of other NATO / EU member states that the world was closing ranks around Ukraine, emboldened by the stances of Russia and China (which has its own little contretemps with the Biden administration over Taiwan, while the EU's 27 member states, the USA, UK, Canada, Australia, Japan and New Zealand (for what its worth), are supporting Zelensky's futile war, the rest of the world seems happy with a 'business as usual' relationship with Russia.
Had India complied with the US’ illegal sanctions, then the New York Times wouldn’t have recently admitted that their sanctions failed as the West’s efforts to “isolate” Russia politically also had. It was largely due to India's truly independent grand strategy that this latest phase of the New Cold War didn’t end in the collapse of Russia's economy and the restoration of unipolarity, which would have been detrimental to India and every other developing country’s interests while you could have safely bet your life savings that the Americans would have taken advantage of the loss of Russian oil and gas exports to EU member states to well and truly shaft the major European economies.