India’s growing frustration with China has taken center stage at the 2024 SCO summit. Prime Minister Narendra Modi opted out of the event in Kazakhstan, sending Foreign Minister Subrahmanyam Jaishankar in his place. This decision underscores the ongoing tensions between the two nations, particularly as China aggressively promotes de-dollarization, with strong backing from Russia.
At the heart of the summit’s agenda is the push to move away from the US dollar in international trade. China and Russia are advocating for the use of local currencies, a move that could reshape global trade dynamics. Russia is particularly keen on having its crude oil buyers pay in Chinese yuan or Russian rubles instead of dollars. Both nations are working to persuade other SCO members to join their de-dollarization efforts.
India is clearly not on board with this shift. The Modi administration remains committed to the US dollar and shows no interest in adopting the yuan for trade payments. Despite saving $7 billion in exchange rates by paying for Russian oil in yuan and rubles in 2022, India’s government is uncomfortable with Russia’s demand to settle every crude oil shipment in yuan. This discomfort has prompted India to reduce its dependence on Russian oil, turning instead to the US, where it pays in dollars.
Recent statistics highlight the shifting landscape: by March 2024, 52.9% of all trade in China was settled in yuan, while only 42.8% was settled in US dollars. This marked a significant decline for the dollar. Should other BRICS members follow China’s example, the US dollar could face serious challenges. The dollar’s value depends on supply and demand, and a widespread shift to local currencies for transactions could lead to a decline in its value on forex markets.
Russia’s support for China’s de-dollarization efforts is crucial. The country wants buyers of its crude oil to use yuan or rubles, which is part of a broader strategy to promote local currencies for trade within the SCO. This initiative aligns with China’s long-term goal of reducing dependence on the US dollar and strengthening its own currency’s global standing.
India perceives China’s de-dollarization agenda at the SCO 2024 summit as a strategic move to bolster its economic influence. The Modi administration is wary of this push and is determined to maintain the prominence of the dollar in its trade settlements. This stance is driven by a desire to avoid increasing China’s economic leverage and to keep the dollar’s role in international trade intact.
The dynamics at the SCO summit reflect broader geopolitical shifts. China and Russia’s coordinated efforts to de-dollarize their economies come at a time when the global financial system is in flux. These moves could signal the beginning of a more multipolar currency landscape, where the dominance of the US dollar is increasingly challenged.
For India, the decision to distance itself from the yuan is not just about economic calculations but also about strategic autonomy. By sticking with the dollar, India aims to avoid aligning too closely with China, ensuring it retains flexibility in its foreign policy and economic decisions. This approach is consistent with India’s broader strategy of balancing its relationships with major global powers.
The unfolding scenario at the SCO summit highlights the complex interplay between economic policy and geopolitical strategy. While the immediate focus is on currency and trade, the underlying tensions reflect deeper concerns about influence and control in the global order. As China and Russia push for a new financial architecture, countries like India are navigating these changes carefully, weighing the benefits of new economic arrangements against the risks of shifting power dynamics.
As the summit progresses, the world will be watching closely to see how these debates unfold. The decisions made here could have lasting impacts on international trade and finance. For now, India’s choice to skip the summit in favor of sending a representative underscores its cautious approach to the shifting economic landscape and its commitment to maintaining a balanced and independent stance in global affairs.
