Why did India pay through dirhams to give 28,000 crores to Russia?
India has paid for the supply of oil to Russia. The method of this is that first the calculation of the bill is done in dollar, then India is paying it in dirham.
Russia has been very important in India’s foreign policy. India imports arms as well as oil from Russia. Russia has sold weapons worth 28 thousand crores to India. But at the beginning of last year, after the Ukraine war, tough sanctions were imposed on Russia by other countries. Due to which India was not able to pay the money of those weapons to Russia till now.
But India has found an alternative to pay its dues to Russia which is facing economic sanctions. According to a Reuters report, Indian refiners have started paying in Dubai’s currency dirhams instead of US dollars for Russian oil bought through traders based in Dubai. Going forward, India will also pay the cost of these weapons from Dirham only.
Officials of both countries met last year
Last year, officials of the Defense and Finance Ministries of both the countries held a meeting to discuss the issue and also talked about taking up the issue of payment with the RBI. Both countries had decided in the same meeting that India would pay the price of oil and weapons purchased from Russia in some other currency instead of dollars.
Why did India choose the currency of Dubai
In fact, after the Russia-Ukraine war, the G-7 countries and their allies have imposed a price cap on Russian oil. Due to this ban, many oil importing countries stayed away from Moscow, as a result of which the spot prices of Russian crude oil have recorded a discount compared to other grades. India got the benefit of this and the Indian refiner bought oil at a good discount.
In such a situation, if India is using alternative currency to do business with Russia and to pay the cost of weapons other than oil. On the other hand, Dubai is a country calling itself neutral. The United Arab Emirates has not imposed any sanctions on Russia. In such a situation, it becomes easier for India to pay in dirhams instead of dollars.
how to pay in dirham
According to a Reuters report, India has paid for the supply of oil to Russia. The method is that first the bill is calculated in dollars, then India is paying it in dirhams. India is also the second largest trading partner of UAE. Russia’s major oil producer Rosneft is sending crude oil to India through other trading firms including Everest Energy and Coral Energy. India has now become the second largest oil buyer country after China.
why is the dollar a global currency
Before 1944, most countries considered gold as a better standard and used to do business with it. The governments of those countries used to promise that they would fix their currency on the basis of the demand for gold. After the Bretton Woods Agreement in 1944, the strengthening of the dollar started.
In the Bretton Woods Agreement, all the developed countries of the world joined together at Bretton Woods in New Hampshire and fixed the exchange rate of all currencies against the US dollar. At that time America was the country which had the largest gold reserves in the world. The Bretton Woods Agreement also allowed other countries to back their currency to the dollar instead of gold.
At the same time, in the early 1970s, once again many countries started demanding gold instead of dollars, because they needed to fight inflation. But by then the dollar had become the most secure currency in the world.