For the first time ever, India and the United Arab Emirates (UAE) settled an oil trade without first converting their respective local currencies to the United States dollar as has been the custom in the age of dollar dominance.
According to reports, Indian Oil Corp., India's top refinery, purchased one million barrels of oil from the Abu Dhabi National Oil Company using only rupees, delivering yet another incremental death blow to U.S. dollar dominance.
The oil sale is the first to occur ever since India and the UAE entered a Memorandum of Understanding (MoU) back in July establishing a Local Currency Settlement (LCS) system that can now be used by the Reserve Bank of India and the Central Bank of the UAE to facilitate trade without the need for U.S. dollars.
Thanks to this MoU, India and the UAE will now be able to engage in bilateral trade for all sorts of things, not just oil, using only the rupee and the dirham. The Reserve Bank of India says the agreement will facilitate "seamless cross-border transactions and payments, and foster greater economic cooperation.
(Related: Last fall, Saudi Arabia replaced the United States with China as its new most "reliable partner.")
The days of U.S. dollar dominance in global trade are numbered
The first test of the LCS system involved the sale of 25 kilograms (kg) worth of gold from a UAE gold exporter to an Indian buyer at a cost of 128.4 million rupees, the equivalent of around $1.54 million.
The test was a success, which is why it was followed up by the sale of actual oil from the UAE to India. India also recently made a purchase of oil from Russia using non-dollar currencies.
Because India currently ranks as the world's third-largest importer of oil, this is a really big deal because it shows that the U.S. dollar is no longer king – or at least it is moving in the direction of becoming irrelevant in world trade much faster than many anticipated.
"Moreover, any surplus balances in the local currencies can be invested in various local assets, including corporate bonds, government securities, and equity markets," WIONews in India further reported about the benefits of using the LCS system.
For the time being, the vast majority of global oil sales are still priced and conducted according to the U.S. dollar. This ensures steady and stable demand for the greenback since every country still needs to convert to it in order to buy and sell oil.
Things are changing, though. The fact that increasingly more countries are shifting away from the U.S. dollar when conducting cross-border sales and purchases of oil and other commodities suggests that the age of the U.S. government being the police force of the world is coming to an end.
The "borrow and spend" policies that have long dominated the U.S. economy will no longer work once enough countries kick the U.S. dollar to the curb. Once that happens, it is game over for the U.S. economy which, like the Titanic, is not too big to fail after all.
"One of the core staples of the past 40 years, and an anchor propping up the dollar's reserve status, was a global financial system based on the petrodollar – this was a world in which oil producers would sell their product to the U.S. (and the rest of the world) for dollars, which they would then recycle the proceeds in dollar-denominated assets and while investing in dollar-denominated markets, explicitly prop up the USD as the world reserve currency, and in the process backstop the standing of the U.S. as the world's undisputed financial superpower," explains Zero Hedge about how the corrupt, fiat-based monetary system of the U.S. has long worked – but that will very soon no longer work.
How much longer do you think the U.S. dollar will remain as king of the global currencies? Find out more at Collapse.news.
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