Oil trade must now be invoiced in rupees.
India has the bargaining power to make rupee deals with oil suppliers since it is a major user. The global business climate is currently extremely unreliable and unstable for the international economy. This has caused supply chain disruptions that are having a devastating impact on the global economy. India is not immune to these changes.
India has put in place a carefully calibrated “protection of national interest” strategy to deal with these persistent and linked episodes of economic instability. The global economy is under inflationary pressure due to severe disruption to energy supply chains due to economic sanctions imposed on Russia by developed countries. Due to this issue, the Reserve Bank of India now allows the use of local currency for invoicing, settlements and cash transfers by establishing a “Vostro Special Account” with the partner’s bank(s) appropriate trades.
India has successfully exploited Russia as a leverage point to secure cheap supplies of crude oil, natural gas, coal, fertilizers and other essentials. As part of this process, India is working with Saudi Arabia and Bangladesh to settle local currency exchanges in rupee-riyal and rupee-taka, respectively, in view of Bangladesh’s dwindling foreign exchange reserves.
Energy security has risen to the top of the priority list for oil-importing countries like India due to changing global energy dynamics brought on by economic sanctions. India’s decision to encourage trade in rupees would not only allow its trading partners to avoid economic penalties, but it will also provide India with the opportunity to explore opportunities to promote its currency for cross-border trade. .
Now is the time for India to move beyond transactional de-dollarization or local currency trade and move to the next stage of its economic development. Future oil contracts can be traded in rupees, or petro-rupees, as one method of doing this. The exchange of energy in petro-yuan has been formalized between China and Saudi Arabia.
In the same vein, India, the world’s third-largest energy consumer, has strong bargaining power and has suggested using the petro-rupee for energy trading. India’s energy needs will increase dramatically as its economy grows, and the nation can use it as a bargaining tool when trying to negotiate rupee contracts with suppliers like Iraq, Saudi Arabia , Russia, United Arab Emirates and Nigeria.
As oil consumption in Western countries is stagnating or declining, all of these major suppliers are focusing on India, which is expected to be the main driver of future oil demand growth. As India’s energy market develops, there will be opportunities to attract other suppliers like Kuwait, Indonesia, Oman and Qatar.
A favorable ecology must be created for the petro-rupee trade to take place. Indian commodity markets can be very helpful in bringing buyers, sellers and speculators together in one place, allowing producers and consumers to investigate the true price and manage their risks.
Since physical commerce is no longer an option, this can be accomplished easily through digital commerce. The short-term introduction of swap funds for oil contracts by Indian commodity exchanges may initially involve both domestic and foreign traders. It is comparable to introducing an investor to the stock market through the systematic investment strategy of a mutual fund.
Instruments with derivatives
Commodity exchanges may optionally add other derivative products, such as long-term contracts and futures for large traders and a variety of “options” for smaller players. Exploring fair energy pricing for oil and gas which is indicative of ‘India’s trading basket’ would result in the development of a comprehensive trading environment.
A facilitating value chain for Indian currency trading is made possible by the massive storage capacity being built by major vendors (Aramco, ADNOC and now Rosneft) and the Indian government.
The militarization of commodities and financial instruments has increased distrust to unprecedented levels globally. Recent geo-economic events have shocked us all and made us think further than before. India is expected to emerge as a ‘rule maker’ rather than a mere ‘rule taker’ in the changing geo-economic scenario.
For example, Indian oil companies should gradually and quickly look at oil price discovery on Indian exchanges rather than Western benchmarks like Brent and West Texas Intermediate, which have given their growing economic clout (WTI). The International Energy Exchange (IEE), which China previously established in Shanghai, has attracted several financial market speculators.
Due to its open and rules-based market structure, increasing energy imports to meet growing demand, and cordial and harmonious relations with major oil suppliers, India is better placed to impose as an Asian exchange for the discovery of oil prices. This will provide a strategy for trading petro-rupees, which India currently needs as almost all financial instruments have been converted into weapons.
Last but not least, it was the economic sanctions network, rather than India’s desire for local currency trading and, ultimately, transactional and financial de-dollarization, that sparked this lawsuit. Furthermore, it aims to establish a multipolar, inclusive and sustainable international system that benefits both emerging and developed countries. India should explore all local and even non-local currency trading options to safeguard its national interest.
edited and proofread by nikita sharma