Can China and India Join (with Russia) in De-Dollarization?

May 8, 2023, 2022 (EIRNS)—Modern Diplomacy, a web platform which describes itself as “a leading European opinion-maker with far-reaching influence across the Middle East, Africa, and Asia,” on April 30 ran an article with the provocative headline, “India Joins China in De-Dollarization Drive.”  The report begins with the Indian policy as of March 29 of accepting rupee payment for exports to 18 “countries facing dollar shortages or currency crises,” but also says that India is exploring a Russia-India-China alternative to SWIFT. The article otherwise emphasizes that China and India have in common, not only increasing trade volume between them, but the anticipation of U.S./EU sanctions potentially spreading to them.

In fact, the latest (12th) set of sanctions proposed by the European Union “executive,” according to Reuters May 8, will sanction seven Chinese companies “to punish China over accusations of Beijing’s role in Russia’s war in Ukraine.” The EU executive also proposes to “curb [European] exports to nations seen as involved in bypassing Russia trade restrictions under new sanctions against Moscow”—so India is indirectly targeted as well, while the fantasizing EU directly targets China, Turkiye, U.A.E., and the Central Asian Republics.

In addition, according to the Modern Diplomacy report, China and India both have strong interest in expanding trade and cooperation with Iran, which requires de-dollarization because of the extensive and apparently permanent U.S. sanctions vendetta against that important nation.

Russia, said Foreign Minister Sergey Lavrov at the May 4-5 Shanghai Cooperation Organization ministerial in India, has accumulated too large a volume of rupees because of its increased trade surplus with India. An article May 5 in Yahoo News, one of several reports on Lavrov’s remarks, said: “Foreign Minister Sergey Lavrov noted the widening trade deficit with India, which has been a top buyer of Russian oil since Moscow launched its war on Ukraine last year. ‘As for rupees, this is a problem because there are billions of rupees accumulated in accounts at Indian banks and we need to use this money,’ Lavrov told reporters in India on Friday [May 5]. ‘For this, rupees should be converted into other currencies. This is being discussed.’ ”

That was Lavrov’s remark. Reuters added its own report that Russia-India talks about trade in rubles and rupees had been suspended, and that Russia wants to be paid by India for oil exports in Chinese yuan instead.

This provides a new challenge for India-China cooperation in de-dollarization, notwithstanding the historic tensions between Indian and China. Russia could invest its surplus of rupees in Indian bank bonds or bonds or Indian corporations investing in projects in Russia’s Far East, but thus far has said no to Indian proposals for this.