Bitcoin & Geopolitics – Week 6

Bitcoin & Geopolitics - Week 6

There are growing signs of distrust towards the dollar. Especially in India, where Russian oil is being fought for, even if it means alienating the empire.

Dirhams rather than rupees

Indian oil refiners now pay for most of their Russian oil in dirhams. The leading banks are Dubai Mashreq Bank and State Bank of India.

It is up to the Indian banks to fend off possible American sanctions if the price of a barrel of Russian crude rises back above the ceiling of 60 dollars prescribed by the G7.

Indeed, India refuses to cut itself off from Russia’s precious oil. India’s Energy Minister, Hardeep Singh Puri, wanted to be clear about the Energy Week event in India:

“We are confident that we will be able to use our market to source wherever we need, wherever we find favorable terms.”

Nor does New Delhi know that the price of a barrel would soon explode if Russian oil exports disappeared.

“Imagine a situation where Iranian oil is allowed, Russia has problems and Venezuela cannot supply its oil. The price per barrel will not rise to 200 dollars, but 480 dollars”the Indian minister said with a hammer that it does not matter where the oil comes from, including from Siberia.

According to Reuters, 70% of Russian oil shipments in January were destined for the Asian giant, which has become the main buyer of Russian oil in recent months.

Carefully, New Delhi does not use Western shipping companies that are obliged to respect the embargo. Russian crude oil is distributed through a “ghost fleet” of 600 tankers bought by Moscow.

About 400 crude oil carriers, or 20% of the world’s fleet, have switched from conventional trade to Russian trade, Bloomberg reports.

“Russia has replaced Iraq and Saudi Arabia as India’s main supplier of crude oil. »

Why the Dirham rather than the Indian Rupee?

The fact is that Russia exports much more than it imports from India. This imbalance resulted in the accumulation of rupees in the Russian central bank’s balance sheet. However, the rupee is a currency that continues to depreciate due to India’s chronically negative trade balance.

The Dirham is more attractive since it is pegged to the dollar. In addition, the UAE has a neutral position towards Russia, and no sanctions are imposed. In addition, the Moscow stock exchange is preparing to accept the dirham, offering investment opportunities for the Emirati sovereign wealth fund.

Indian banks also find their account there to cover their tracks to avoid American sanctions. These sanctions would apply if UAE only accepts dollars from India. But this is not the case.

“The UAE is India’s third largest trading partner, and our current trade value stands at $88 billion. Might as well do it in local currency [et non en dollar] »said India’s ambassador to the UAE on January 24. “It’s very important to disentangle trade from geopolitics.”

The same goes for the Minister of Foreign Trade of the United Arab Emirates Thani Al Zeyoudi who showed a week before in Davos that he wanted to encourage non-oil trade in the local currencies of the two countries.

The minister clarified that the oil trade was not in Indian currency “no study”. That said, the latest developments reported by Reuters suggest that this rupee-dirham trading mechanism will indeed buy Russian oil…

And why don’t you finally use bitcoin?

“Russia has become India’s largest oil supplier and has contributed significantly to the country’s energy security”Russian Ambassador to India Denis Alipov told the Indian Council on World Affairs on February 2.

Denis Alipov welcomed the launch of a mechanism for trading in rupees and roubles, but lamented that Indian banks are “too cautious” to use it.

“He’s scared. Indian banks want to be safe [de sanctions américaines]. It will take them longer to realize that this will not harm the Indian banking system”he declared.

Indian banks prefer to go through Dubai so they can plausibly deny whether Washington is accountable. Their greatest fear is to wean themselves off the dollar, which is the equivalent of signing their death warrant to an international bank.

Banks are still worried about the idea of ​​being cut off from the dollar and the SWIFT system. However, this burst of energy is aimed at overcoming the greenback very well for bitcoin which is struggling a bit.

These tedious arrangements to play cat and mouse are an indication of the lack of a credible alternative to the dollar in its role as an international currency.

Together with the Lignthing Network, bitcoin could replace the SWIFT network and the dollar overnight. The aftermarket system is already there, ready to go for 14 years.

The volatility of bitcoin is likely to decline for all nations (except El Salvador). Too risky.

And yet, it must be understood that this volatility is only a reflection of its small size (~400 billion dollars). Gold is preferred by central banks because of its supposed stability. But this stability is only due to one thing: the fact that the world stock of gold weighs 10,000 billion dollars.

Bitcoin will become less stable when it replaces the $11.6 trillion in foreign exchange reserves held by central banks of exporting countries. In such a case, one bitcoin would be worth $600,000.

In other words, given the current price of bitcoin and the geopolitical tensions that will not fade anytime soon, is El Salvador in serious danger?

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Nicolas Teterel avatar
Nicolas Teterel

Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.

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