Russian oil deal done in Chinese currency! Are India, China and Russia preparing to end the reign of the dollar?

Recently, an important piece of news emerged from the international energy market. According to reports, India has now started paying for crude oil from Russia in the Chinese currency Yuan. This means that India buys crude oil from Russia, but pays Russia in the Chinese currency Yuan. This is an important effort to counter the dominance of the dollar. Although payments in the Chinese currency are small compared to India’s total transactions, they reflect a change in India’s payments system and show that India, China and Russia have begun to counter Trump’s dollar-based arrogance without creating a BRICS currency. Note that the value of one yuan in the international currency market is currently equal to 12.34 Indian rupees. This move by India may be small, but its geopolitical implications are significant and send a message. Russian Deputy Prime Minister Alexander Novak confirmed that India still mainly pays in the Russian currency, rubles, but the use of the yuan is also increasing. The move strengthens the triangular alliance of India, China and Russia without a BRICS currency, dealing a blow to President Donald Trump’s “dollar diplomacy”. India’s state-owned Indian Oil Corporation recently paid for two or three oil cargoes from Russia in yuan, a website called Investing Live reported. The move marks a change from 2023, when, amid government turmoil over strained relations with China, state refiners stopped making payments in yuan, while private refiners continued to use the currency. India resuming payments in Chinese currency also indicates warming relations between the two countries. Remember Trump’s threat: India’s change in the payment system for crude oil is linked to a statement by President Trump. The newly elected US President Donald Trump strongly warned the BRICS countries (Brazil, Russia, India, China, South Africa) against creating a new currency or supporting an alternative to the dollar. In a post on Truth Social on November 30, 2024, Trump said: “The BRICS countries must not create a new currency, or they will face 100% tariffs and these countries will be locked out of the US market.” Trump’s statement is part of his “America First” policy, according to which Trump wants to maintain the global dominance of the dollar at all costs. Trump argues that the dollar accounts for 58% of world trade and that BRICS efforts will weaken it. Why do BRICS countries want de-dollarization? De-dollarization is the process of reducing the dominance of the US dollar in the global financial system. This is mainly driven by the BRICS countries, which represent about 40% of global GDP and 45% of the population. By 2025, the dollar’s global share in international trade will drop from 73% to 54%. The BRICS countries demand de-dollarization to reduce the global dominance of the US dollar and increase the economic and geopolitical autonomy of their countries. After the Ukraine war, the US imposed sanctions on Russia and banned it from the SWIFT payment system. This made the BRICS countries realize that America can use the dollar as a weapon. India, China and Russia have found a middle ground. BRICS countries are moving towards de-dollarization, but the pace is slow. After Trump’s threat, BRICS countries temporarily postponed the proposal for a new BRICS currency. South Africa has said it has no plans for a new currency. BRICS set out plans for a common currency at the Rio summit in 2025. Instead, emphasis was placed on trading in local currencies. Brix Pay is now being developed as a decentralized payment platform. It will work as an alternative to Swift. By 2025, 90% of BRICS trade will be in local currencies. The yuan accounts for 44% of Russia-China trade. Now, payment in Chinese currency by India for purchase of crude oil from Russia is a middle ground outside the BRICS currency. It will meet India’s needs and challenge the dominance of the dollar. Therefore, yuan-based trade between India, China and Russia is a true symbol of that ‘first step’. India, the world’s third-largest oil consumer, spent 2.5 billion euros buying crude oil from Russia in September, down 14 percent from the previous month. India’s yuan experiment is currently more of a practical measure than a geopolitical one. The aim is to obtain Russian oil at a lower price and avoid Western sanctions. Its strategic implications are profound.