Petro-Rupee Arrives, Impact On Dollar Minimal For Now
Posted on 08/16/2023
India has bought 1 million barrels of oil, an entire oil tanker, with domestic currency. Indian Oil Corp. made the purchase from Abu Dhabi National Oil Company. The financial media has taken notice of the purchase and some say the greenback will go into the dustbin of history.
However, that is unlikely at this time. It takes over 80 rupees to equal 1 USD, the same exchange rate as that of the Russian rouble. The rupee is a relative newcomer in international trade, and there is substantial doubt that the rupee market is deep enough or agile enough to be traded worldwide. Despite strong demographics and a reasonable economy, imports exceed exports, indicating less demand for rupees than would be required. Importantly, Russia has a trade surplus with India equivalent to US$ 40 billion per year, and is stuck holding the currency with no realistic outlet.
Thus, while noteworthy, this oil purchase is likely not an imminent threat to dollar supremacy. However, the upcoming BRICS summit may be another shot across the bow. Chatter persists that the group will make an announcement of some kind regarding currencies and expansion, although officials from member nations have generally not supported these claims.