India is one of the major buyers of petroleum and oil products. Russia advanced to become one of the country’s most important suppliers. But you no longer pay in US dollars. This hastens the end of the petrodollar era.
Washington has done itself a disservice by imposing sweeping financial sanctions on Russia and confiscating the Kremlin’s dollar assets. Instead of stopping trade with Russia, customers are increasingly switching to other currencies. Among them is India, which is Russia’s top destination for crude oil by sea, Reuters recently reported.
The supremacy of the dollar has been challenged from time to time in the past, but has endured due to the overwhelming advantages of using the most widely used currency in business transactions. India’s oil trade, reacting to the turmoil of sanctions and the Ukraine war, is the strongest evidence yet of a currency switch that could prove permanent. After Western governments imposed an oil price cap on Russia on December 5, Indian customers paid for most Russian oil in non-dollar currencies, including the United Arab Emirates dirham and, more recently, the Russian ruble.
According to the International Energy Agency in Paris, India ousted Europe as the main buyer of Russian oil by sea last year, buying up cheap barrels and increasing imports of Russian crude oil 16-fold compared to the pre-war period. Russian crude accounts for about a third of total imports. For Indian refiners, which have started paying for some Russian oil purchases in rubles in recent weeks, some of the payments have been made by the State Bank of India through its account in Russia, according to trade sources.
If you now consider that other countries are either already doing oil trading in other currencies (e.g. Iran) or are at least considering doing so (e.g. Saudi Arabia and Iraq), it also becomes clear that the US dollar is particularly important in oil trading also generally plays a less and less prominent role. For the US government, however, this also means that it is becoming increasingly difficult to finance the new debt with foreign capital.