In a development widely viewed as a potential death knell for dollar dominance, India has quietly begun purchasing oil, particularly from Russia, using its own currency, the rupee, rather than the US dollar. According to a media report by Investing.com, India has also put in place a mechanism that allows these rupees to be recycled back into its domestic economy.
This effectively creates a “petro-rupee” model, echoing the long-standing “petro-dollar” system in which oil revenues flow back into the seller’s financial ecosystem, but this time with India at the center. Traditionally, global oil trade is priced and settled in US dollars, compelling nations to hold dollar reserves and depend on US-controlled banking and clearing systems. India’s new arrangement challenges this norm.
Under the framework, oil purchases are settled in rupees through RBI-approved agreements, bypassing the dollar entirely and avoiding US financial intermediaries. Exporters such as Russia receive rupee payments into special Vostro accounts, which can then be used to invest in Indian government bonds or pay for Indian imports. As a result, the money remains within India’s financial system rather than flowing outward.
This shift significantly reduces India’s reliance on dollars for energy imports, helping stabilize the rupee and lower exposure to exchange-rate volatility. By recycling foreign earnings into domestic bonds, infrastructure, and trade, India can fund growth without increasing external debt, while simultaneously binding energy suppliers more closely to its markets.
Beyond the immediate economic benefits, the move enhances India’s geopolitical leverage. By demonstrating that oil can be bought, paid for, and financially reintegrated without touching the US-led dollar system, India has proven a critical point: the dollar is no longer indispensable in global energy trade. In doing so, it has weakened dollar exclusivity and established a working template that other emerging economies may increasingly look to emulate.
This shift is occurring amidst President Donald Trump’s repeated warnings to BRICS countries against abandoning the US dollar as the world’s reserve currency. He has threatened to impose 100% tariffs on any country that launches a new alternative, to replace the dollar.
The BRICS alliance includes Brazil, Russia, India, China, South Africa, and several new members added in recent years. While it lacks a unified currency, discussions about creating one have intensified since Western sanctions were imposed following Russia’s invasion of Ukraine.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: ZEE News
