- The two nations will settle trade using the India Rupee and drastically cut foreign exchange costs.
- Real-time payment system will allow for seamless cross-border transactions and payments, and improve economic cooperation.
- African countries that want to join BRICS include Egypt, Zimbabwe, Nigeria, Algeria, Senegal, Sudan, and Tunisia.
- South Africa will host the 15th BRICS summit on 22-24 August 2023.
The BRICS’ intentions to ditch the US dollar are bearing fruit. India and the United Arab Emirates have signed an agreement to carry out bilateral trade in their national currencies. The deal was signed in Abu Dhabi on July 15, 2023, between Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, and Indian Prime Minister Narendra Modi. The two nations will settle trade using the India Rupee and drastically cut foreign exchange costs that come with the US dollar. Essentially, the transactions settled with the dollar will shift to the Rupee going forward.
Real-time payments in cross-border trade
In addition, India and UAE signed an agreement that will allow them to link their fast payment systems. These are the Unified Payments Interface of India (UPI) and the Instant Payment Platform of the UAE (IPP).
The real-time payments system will allow for seamless cross-border transactions and payments, and improve economic cooperation. Furthermore, it will allow exporters and importers from both countries to invoice and pay in their respective local currencies, developing a foreign exchange market between them.
UPI in India
Unified Payments Interface (UPI) powers multiple bank accounts into a mobile application, merging several banking features, seamless fund routing, and merchant payments. UPI also caters to P2P collection requests and can schedule payments as per requirement and convenience.
IPP in UAE
The Instant Payments Platform (IPP) allows instant transfers between bank accounts 24/7. The platform is mandatory for all financial institutions operating in the country. The demand for IPP in the UAE came from the 28 million real-time transactions in 2021, with ACI Worldwide, predicting the figure to grow to 134 million by 2026.
The bilateral trade between the UAE and India stands at US$84.5 billion between April 2022 and March 2023.
Why the US worries about the pact
The global drive towards de-dollarization fuels on amid relentless efforts by countries across the globe to reduce, and eventually ditch dependency on the US dollar.
India is the third largest importer of oil. Using the Rupee for international trade will largely boost its economy to the detriment of the US. The UAE is the fifth largest exporter of oil and accepting payments in local currencies threatens the value of the dollar. In the Fiscal year 2022-23, India reports to have saved over US$7 billion by paying for oil through the Chinese Yuan.
Additionally, the largest oil exporter, Saudi Arabia, has shown interest in joining the BRICS nations. About twenty countries have expressed their interest in joining the block, sending the United States into panic mode.
African countries that want to join BRICS
The weaponizing of the US dollar has made other countries question the utilization of the greenback in their financial transactions. Several African countries, including Egypt, Zimbabwe, Nigeria, Algeria, Senegal, Sudan, and Tunisia have expressed interest in joining BRICS.
“Egypt has applied to join the BRICS group because one of the initiatives that BRICS is currently engaged in is the maximum transfer of trade to alternative currencies, whether national or the creation of some kind of joint currency. Egypt is very interested in this,” Russian ambassador to Cairo, Georgy Borisenko
South African Ambassador to BRICS said that two East African nations had already applied to join the block. He, however, refused to mention them.
All eyes are now on South Africa, as they host the 15th BRICS summit on 22-24 August 2023. Contextually, the International Criminal Court has issued an arrest warrant for President Vladamir Putin. If Mr Putin attends the meeting, the ICC expects that he will face arrest against Ukraine invasion charges.