{"id":255527,"date":"2023-08-09T20:55:41","date_gmt":"2023-08-09T15:25:41","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=255527"},"modified":"2023-08-29T15:48:28","modified_gmt":"2023-08-29T10:18:28","slug":"the-grammar-of-commerce-in-a-new-age-of-geopolitics","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/the-grammar-of-commerce-in-a-new-age-of-geopolitics\/","title":{"rendered":"The grammar of commerce in a new age of geopolitics"},"content":{"rendered":"\n

Source<\/strong>– The post is based on the article \u201cThe grammar of commerce in a new age of geopolitics\u201d <\/strong>published in \u201cThe Hindu\u201d <\/strong>on 9th August 2023<\/strong>.<\/p>\n

Syllabus: <\/strong>GS2- International relations<\/p>\n

News <\/strong>– Since March 2018, 23 advanced and developing countries have agreed for currency swap arrangements with India, extending credits in settling transactions.<\/p>\n

How an unexpected shift in the utilization of the Indian rupee for international transactions occurred after the Ukraine-Russia conflict? <\/strong><\/h2>\n

Sanctions on Russia directly targeted the assets of Russian financial institutions<\/strong>. This situation posed a significant challenge for both Russia and India.<\/p>\n

To address this, an alternative approach<\/strong> was adopted for settling payments <\/strong>between the two nations. It involves the utilization of the Indian rupee in trade-related transactions.<\/strong><\/p>\n

The payments originating from either India or Russia are now directed to Rupee Vostro accounts <\/strong>established in Russian banks by authorized dealer banks in India<\/strong>. These accounts are responsible for facilitating the settlement of payments<\/strong> between the two countries.<\/p>\n

How India-Russia alternate payment arrangement is facing challenges?<\/strong><\/h2>\n

Russia is continuing with a trade surplus.<\/strong> In 2020-21, it amounted to $3.42 billion, followed by similar surpluses in the following years.<\/p>\n

Russia is reluctant to hold more of the Indian rupee as an asset in the Vostro account.<\/strong> The rupee has a low rank in the global currency hierarchy<\/strong> and may be subject to depreciation.<\/strong><\/p>\n

Indian refiners have settled some payments for Russian oil imports using the Chinese yuan. It seems to be acceptable to Russia.<\/p>\n

How similar payment arrangements were made in the past?<\/strong><\/h2>\n

India established comparable bilateral trade and clearing agreements <\/strong>during the 1950s.<\/p>\n

India and the Soviet Union engaged in bilateral trade agreements<\/strong> that involved the establishment of a closed rupee-denominated account.<\/strong> This account was utilized to manage both the exchange of goods and credit-related transactions<\/strong> between the two nations.<\/p>\n

This initiative was initiated in the 1950s when the Soviet Union established a steel plant in Bhilai, despite opposition from Western nations.<\/p>\n

The Soviet Union experienced a consistent buildup of trade surpluses<\/strong>. The decision to float the dollar in 1971 resulted in turbulence within the currency market and also affected the Soviet rouble.<\/p>\n

The situation became more complicated due to the fragmentation of the former Soviet Union<\/strong>, which left Russia as a separate entity.<\/p>\n

How is the current situation different from the past? <\/strong><\/h2>\n

The geopolitical situation<\/strong> is different from the past. Presently, Russia is not averse to obtaining yuan for the management of its surpluses<\/strong> within the existing rupee account.<\/p>\n

However, historical evidence indicates a reluctance within the sphere of BRICS <\/strong>for non-Chinese members to utilize the Chinese currency.<\/strong><\/p>\n

This hesitance became apparent during a proposition to create a clearing system among BRICS<\/strong> as a response to China’s persistent and sizable surpluses<\/strong>. Regrettably, this proposal did not come to fruition.<\/p>\n

What are other similar alternate payment settlements systems related to using local currencies?<\/strong><\/h2>\n

India and the United Arab Emirates have rupee-dirham arrangements.<\/strong><\/p>\n

This arrangement covers various transactions including trade, remittances, and capital movements<\/strong>.<\/p>\n

It allows India to circumvent dollar payments<\/strong> for its imports of crude oil and minerals from the UAE. The agreement outlines provisions for linking their payment and messaging systems, <\/strong>enabling swift and cost-efficient money transfers. <\/strong><\/p>\n

Efforts are also underway to negotiate a similar agreement with Indonesi<\/strong>a, utilizing the rupiah for transactions with India.<\/p>\n

How a new financial architecture is emerging?<\/strong><\/h2>\n

Indian rupee, Russian rouble, Chinese yuan, UAE dirham, and even Indonesia’s rupiah are aligned towards the shared objective of localized currency transactions<\/strong>.<\/p>\n

Southern nations are preparing to engage in trade and payment settlements<\/strong> among themselves. They want to move away from the use of dominant currencies<\/strong>.<\/p>\n

This trend will circumvent the need to rely on institutions from advanced countries<\/strong>, such as the International Monetary Fund, the World Bank, and private capital, at least for the purpose of settling their bilateral transactions.<\/p>\n

There are challenges stemming from political disparities<\/strong> and the differing standing of currencies<\/strong>. However, geoeconomics<\/strong> could potentially surpass geopolitical<\/strong> obstacles and help bridge these differences.<\/p>\n

It signals the early stages of a novel financial structure<\/strong>. Currencies of Southern nations are going to replace the longstanding hegemonic and exploitative system<\/strong> enjoyed by the currencies of the North.<\/p>\n","protected":false},"excerpt":{"rendered":"

Source– The post is based on the article \u201cThe grammar of commerce in a new age of geopolitics\u201d published in \u201cThe Hindu\u201d on 9th August 2023. Syllabus: GS2- International relations News – Since March 2018, 23 advanced and developing countries have agreed for currency swap arrangements with India, extending credits in settling transactions. How an… Continue reading The grammar of commerce in a new age of geopolitics<\/span><\/a><\/p>\n","protected":false},"author":10320,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[212,239,238,10498],"class_list":["post-255527","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-2","tag-international-relations","tag-ir","tag-the-hindu","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/255527","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10320"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=255527"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/255527\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=255527"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=255527"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=255527"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}