China, India, and Russia Intensify De-Dollarization Efforts, Conducting 90% of Trades in Local Currencies
In a significant move that challenges the dominance of the US dollar in international trade, the BRICS countries, particularly Russia, China, and India, are increasingly conducting trade in their local currencies. The latest development involves Russia's purchase of weapons worth $4 billion from India, paid entirely in Rupees.
This transaction is part of a larger effort by the BRICS alliance to promote de-dollarization and reduce dependence on the US dollar. Russia has stated that the purchase of Indian weapons is aimed at supporting its defense against Ukrainian settlements and that it will continue to trade with New Delhi for various machinery, car parts, and engineering goods.
The strengthening of the Russia-India axis within the BRICS alliance has led to a 25-fold increase in trade between the two nations, reaching over $50 billion per year since the start of the special military operation in Ukraine. The two countries have ambitious plans to increase trade to over $100 billion per year within the next five years, with a focus on conducting transactions in local currencies under the rupee-ruble friendship agreement.
China, another key member of the BRICS alliance and the main technological rival of the United States since 2010, is also actively involved in the de-dollarization process. Russian President Vladimir Putin and Chinese President Xi Jinping recently met to discuss the enhancement of their global partnership and strategic operation of their respective economies. The meeting highlighted the intention to strengthen the commercial relationship between China and Russia, announcing that 90% of their exchanges will be conducted in Rubles or Yuan.
The de-dollarization efforts of the BRICS alliance have not gone unnoticed, with several other nations expressing interest in joining the group. In August 2023, Egypt, Ethiopia, Iran, and the United Arab Emirates joined the alliance, expanding a reality that was born in 2009 from the union of India, China, Russia, and Brazil. The BRICS is also working on a common currency to be used within the bloc to support internal trade, in addition to the local currencies already in use.
The increased collaboration between Russia and India has seen Russia investing in Indian government treasury bonds, while India has become a privileged club of arms suppliers to Russia, alongside Iran and North Korea. This collaboration has further strengthened the "special and privileged strategic partnership" between the two nations, with India taking advantage of Russia's need to diversify its Asian partners away from China and reduce its dependence on the US dollar.
As the BRICS alliance continues to grow and more nations follow its de-dollarization agenda, the next decade is likely to pose significant challenges to the dominance of the US dollar in international trade. The strengthening of local currencies and the promotion of trade in these currencies within the BRICS bloc and beyond may lead to a significant shift in the global economic landscape, with far-reaching implications for the United States and its allies.
