India and UAE redefine commercial relations as rupee replaces dollar in crude oil transactions, signaling their intention to de-dollarize.
Recent reports on August 14 indicate that India and the UAE have established new trading relations. Just before the highly anticipated BRICS summit, India, a vital alliance member, concluded its first petroleum oil transaction with the UAE, using rupees instead of the US dollar.
In addition, this transaction is not an isolated occurrence but a more prominent strategy manifestation. In July, the two countries signed an agreement to settle commercial transactions in their respective currencies. Therefore, this modification eliminates the added stratum of dollar conversion, reducing transaction costs.
An Initiative That Goes Beyond Commerce
In addition to the obvious economic repercussions, this decision sends a political message, reflecting India’s intention to reduce its reliance on the dollar. The commitment to de-dollarization is evident, not only with the UAE but also on a broader scale, intending to nurture relationships with other nations.
In addition to currency exchange, the July agreement includes establishing a real-time payment link and facilitating cross-border transfers. Cardholders in both countries will soon be able to use their domestic cards interchangeably due to the planned interlinking of India’s RuPay and the United Arab Emirates’ UAESWITCH.
However, India’s efforts to internationalize the rupee have yet to meet with swift success. Local currency trade volumes have been minuscule compared to India’s $1.2 trillion in commodities trade during the previous fiscal year.
Consequently, while the recent India-UAE agreement is commendable, India’s aspiration to make the rupee a global currency still appears to be a lengthy and winding road.
In addition, these agreements will likely pave the way for easier financial transactions between the countries. Given that the UAE is India’s second-largest source of remittances, this partnership bears great promise for both countries.
As the world eagerly anticipates the impending BRICS summit, India’s strategic move with the UAE sends a powerful message. The nation is prepared to diversify its trade strategies, looking beyond the dollar as a geopolitical statement and a business move.
