- India and the UAE have advanced efforts to conduct cross-border trades without the US Dollar.
- This aligns with the BRICS effort to de-dollarize their respective economies.
Some member countries of the BRICS Group have taken certain steps that are in favor of the bloc’s plan to contest the potential hegemony of the United States Dollar (USD). During the just concluded BRICS Summit 2023, the BRICS founding members opened the bloc’s doors to accommodate six new member countries including Saudi Arabia, Argentina, the UAE, Egypt, Iran, and Ethiopia.
As a result of this expansion, the collective GDP of BRICS nations in terms of purchasing power parity expanded to 37.3% of the total global economy, a figure that is more than one-third of the world’s economic output. In addition to the increase in economic strength, BRICS member countries also collectively span 48.5 million square kilometers in landmass, encompassing approximately 36% of the globe.
To complement this visible expansion, India and UAE have struck a landmark trade deal that was completed entirely in rupees (India’s local currency). Both countries agreed on a 1 million barrel oil deal. Indian Oil Cor, the country’s petroleum refiner, bought the oil from Abu Dhabi National Oil Company, boycotting the United States Dollar to send a very strong message.
This follows an initial agreement between India and UAE to conduct bilateral trade in rupees instead of the USD, signed when Indian Prime Minister Narendra Modi paid a visit to the UAE. Reuter reported that about 25 kg of gold was also exported from the UAE to India for 128.4 million rupees, a deal that was worth a whopping $1.54 million.
For these trades to commence, the Reserve Bank of India (RBI) and the Central Bank of UAE (CBUAE) signed two Memorandums of Understanding (MoUs) in a bid to enhance cross-border transactions and cooperation.
Bitcoin Likely to Take the Place of USD for BRICS
Apart from the plan for de-dollarization, the move from BRICS demonstrates the growing focus on strengthening local currencies and economic cooperation.
The bilateral efforts will also help to optimize transaction costs and settlement time for both countries. In the long run, the initiative is expected to support economic growth, investments, and remittances between both India and the UAE. It is likely that it would expand to involve other countries, particularly members of the BRICS Group.
India’s use of rupees for international trades was achieved via a global trade framework which the country developed recently. The framework allows the country to conveniently conduct foreign trade dealings with its local currencies instead of the dollar and this totally aligns with the Asian giant’s effort to separate itself from the influence of the West.
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The initial gold deal was somewhat connected to the developing BRICS currency which is still being contemplated. It is rumored that several assets are being considered as an alternative currency to the US dollar including Bitcoin (BTC) and Ripple’s XRP for cross-border settlements.
Bitcoin is touted by many netizens as the most appropriate alternative for the bloc. The coin is generally called a digital dollar and is revered for its decentralized nature. Its independence from government authorities is believed to make it the clear answer for the bloc.