India's oil deals with Russia threaten dollar dominance
Moving away from the dollar: India pays for Russian oil in other currencies, showing a turnaround
Gabriel Thomas (GT)May 8, 2025
U.S.-led sanctions against Russia have staggered the dollar's decades-long advance in international oil trade. Most oil deals with India - Russia's main outlet for seaborne crude - have been conducted in other currencies. India's oil trade provides the strongest evidence yet of a prolonged switch to other currencies in response to the turmoil of sanctions and the Ukraine war. The U.S., European Union and Australia agreed to a price cap on Russian oil last year to exclude the West from financing the war. Since then, Indian customers have paid for most Russian oil in non-dollar currencies, including the United Arab Emirates dirham and, more recently, the Russian ruble, according to several oil trading and banking sources.
Transactions in the past three months total several hundred million dollars. Dubai-based traders and Russian energy companies Gazprom and Rosneft are seeking non-dollar payments for certain niche grades of Russian oil sold above the $60-per-barrel price cap in recent weeks. Three Indian banks backed some of the transactions as Moscow seeks to de-dollarize its economy and avoid trader sanctions. However, continuing to make payments in dirhams for Russian oil could become more difficult after the U.S. and U.K. last month placed Moscow and Abu Dhabi-based Russian bank MTS on the sanctions list.
India last year displaced Europe as Russia's biggest customer for seaborne oil. Russia supplied cheaper barrels and increased imports of Russian crude 16-fold compared to pre-war levels. India's oil purchases have helped the dollar lose ground in international oil trade. The long-standing norms of dollar-dominated global trade are eroding not only in Russia, but also in China and the West. Russia holds some of its foreign reserves in renminbi, while China has reduced its dollar holdings. Further de-dollarization of the global economy is likely.
However, some experts believe that the dollar will not lose its position as the leading currency in international trade despite the sanctions. Russia's short-term efforts to sell things for currencies other than the dollar pose no real threat to Western sanctions. The dollar's strength is unmatched, but the sanctions could undermine the West's financial systems without achieving their goal.
