Last week it was announced that the United Arab Emirates would be joining India among the ranks of the BRICS bloc — a coalition that seeks to empower trade between the emerging economies of its member countries.
This move comes after the Indian government previously announced on Aug. 14 that the country’s leading petroleum refiner, Indian Oil Corp., used the local rupee to buy one million barrels of oil from the Abu Dhabi National Oil Company — not the U.S. dollar.
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This monumental transaction follows the sale of 25kg of gold from a UAE gold exporter to a buyer in India for around 128.4 million rupees ($1.54 million), according to Reuters.
So, what could all of these trade moves mean for the U.S. dollar on the world stage?
Trade talks
Last year, India’s central bank revealed a new framework for settling global trade in rupees — an idea that came into fruition last month, when India the world’s third-biggest oil importer and consumer signed two agreements with the UAE.
First, the two giants agreed to settle trade in their local currencies — in an effort to cut transaction costs and eliminate dollar conversions. They also agreed to set up a real-time payment link to simplify cross-border money transfers.
The agreements will enable “seamless cross-border transactions and payments, and foster greater economic cooperation,” the Reserve Bank of India explained in a recent statement.
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De-dollarization trend
Powerful nations around the world — particularly China and Russia — are keen to dethrone the dollar in response to aggressive U.S. sanctions and foreign policy plays.
Last week, the BRICS bloc agreed to admit Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the UAE to its ranks. A common desire among multiple bloc members is to level a global economic playing field they feel is over reliant on the U.S. dollar.
This is part of a larger trend — deemed “de-dollarization” — has gained such sway that some are questioning whether the dollar’s days of dominance are over. But Treasury Secretary Janet Yellen said no currency currently exists that could displace the greenback.
Yellen’s reassurance follows a 8% decline in the dollar’s share of global reserves in 2022. In an effort to diversify, central banks worldwide have been starting to ditch their dollar reserves in favor of gold.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Source: Finance-yahoo-com.cdn.ampproject.org
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The post Dollar dumped? The UAE to join India in BRICS bloc after the two powerhouses trade 1 million barrels of oil for rupees instead of USD for the first time — what this means for the greenback appeared first on Energy News Beat.