- Despite oil transactions recently being settled in yuan and rubles, the prominence of the US dollar in this market is here to stay.
- India’s Oil and Gas Minister said international payment systems “have been around for a long time” and that displacing the dollar “is not that easy.”
At times, the oil trade has been settled in the Chinese yuan, Russian ruble either Indian rupeebut the idea of ”de-dollarization” (or moving away from the US dollar to settle transactions in other currencies) is still some way off.
“I would like to be able to transact all in rupees. That is my personal (opinion),” Indian Oil and Gas Minister Hardeep Singh Puri told CNBC in an exclusive interview on the sidelines of the Business 20 meeting in New Delhi. .
However the American dollar it will continue to be the currency of choice for transactions in international oil markets, he told CNBC’s Tanvir Gill.
“I don’t know what exchange rate (the dollar needs) to be affected, but I don’t see it… It’s not that easy.”
Indian refiners have started paying for some Russian oil imports in Chinese yuan, according to a Reuters report in July citing sources with direct knowledge of the matter.
Russia was cut off from the SWIFT financial messaging system and heavily sanctioned after the Kremlin’s full-scale invasion of Ukraine. As a result, Moscow and its clients have been forced to look for alternatives to the dollar to make payments.
The US dollar has long been the world’s top oil currency, including for purchases from India.
Reuters also reported that China has switched to the yuan for most of its energy imports from Russia, which overtook Saudi Arabia to become the China’s main crude oil supplier in the first quarter of this year.
“Some refiners are paying in other currencies such as the yuan if banks are not willing to settle trade in dollars,” Reuters said, citing an Indian government source.
Oil has also been settled in Indian rupees. August 14 Reuters reported India Oil Corp, the country’s main refiner, has made a payment to the United Arab Emirates for the purchase of one million barrels of oil.
This comes after the two nations. signed a memorandum of understanding in July to establish a framework to promote local currencies for cross-border transactions.
Indian media widely reported in April that he The Foreign Office had announced that India and Malaysia were beginning to settle their trade in Indian rupees.
In view of this, Puri was asked if the Indian rupee could be part of the de-dollarization trend, especially in the oil market.
Not quite, said the oil minister.
I wish the Indian rupee was the leading currency in the world. But I’m also a realist.
Hardeep Singh Puri
Indian Minister of Oil and Gas
“The main point is that… there are agreements, but of the transactions that are taking place, how many percent come in rupees?”
In it BRICS Summit in South Africa, the Brazilian leader Luiz Inácio Lula da Silva pointed out that the bloc continues to study the possibility of a common currency. That could “increase our options for (a) means of payment and reduce our vulnerabilities,” he said, according to an official translation from the summit.
“Does that mean an alternative global currency has arrived?” Puri asked.
“We have heard about decoupling. But these international agreements, trade agreements, payment agreements, have been in place for a long time,” he added.
As such, he believes it will be a “long journey” for the Indian rupee to gain the kind of prominence in the world that the US dollar has.
“I wish the Indian rupee was the main currency in the world. But I’m also a realist,” he told CNBC.
“I mean, if I ran a $4 trillion economy and 50% of it is in the foreign sector, then I know I only have $2 trillion in international transactions, while the United States and other countries (have more than I)”.