Quick Look:
- Prime Minister Modi skipped the 2024 SCO summit, sending Foreign Minister Jaishankar instead.
- India’s decision reflects strategic discontent with China’s de-dollarization push.
- India saved $7 billion using yuan/rubles for Russian oil but prefers US dollar stability.
- China pushes aggressively for de-dollarization, with 52.9% of its trade in yuan by March 2024.
The SCO 2024 summit has become a stage for India to express its growing discontent with China. This sentiment was unmistakably evident as Prime Minister Narendra Modi decided to forgo the summit in Kazakhstan, opting to send Foreign Minister Subrahmanyam Jaishankar in his stead.
This move speaks volumes about the underlying tensions between the two nations, particularly concerning China’s aggressive push for de-dollarization. India’s reluctance to fully embrace this agenda highlights the strategic and economic complexities that the Modi administration faces.
Modi Skips Summit: A Strategic Decision
Prime Minister Modi’s decision to skip the summit is not just a matter of diplomatic etiquette but a calculated move. By sending Foreign Minister Jaishankar, Modi signals a controlled engagement, distancing himself from the optics of aligning too closely with China’s economic strategies.
The Modi administration has shown a clear preference for maintaining the US dollar’s dominance in trade settlements despite the allure of saving substantial sums in exchange rates, as seen in 2022 when India saved $7 billion by paying for Russian oil in yuan and rubles. This cautious approach underscores India’s strategic priorities and desires to align its economic policies with broader global financial norms.
India’s Opposition to De-dollarization
India’s opposition to de-dollarization is multifaceted. While the economic benefits of using local currencies like the yuan and rubles are evident, as demonstrated by past savings, the geopolitical implications are more complex. Russia’s insistence on settling crude oil shipments in yuan did not sit well with India, prompting a shift in its oil purchasing strategy. India began reducing its dependency on Russian oil, opting instead to buy from the US and pay in dollars. This move not only aligns with India’s economic interests but also signifies a subtle pushback against the growing influence of China and Russia within the SCO framework.
Fear of China’s Economic Ambitions
At the heart of India’s discontent is a fear that China is leveraging the SCO 2024 summit to further its de-dollarization agenda, bolstering its economic dominance. The Modi administration is wary of this shift, recognising the potential long-term implications for India’s economy and global trade relationships. By avoiding the yuan and sticking with the dollar, India aims to maintain stability and predictability in its trade settlements, ensuring that China’s ambitions do not overly influence its economic policies. This cautious stance reflects India’s broader strategic objectives and desire to safeguard its monetary sovereignty.
China’s Aggressive Push for De-dollarization
China’s efforts to promote de-dollarization have been nothing short of vigorous. By March 2024, 52.9% of all trade in China was settled in yuan, marking a significant shift away from the US dollar, which accounted for only 42.8% of trade. This trend illustrates China’s strategic intent to reduce its dependency on the dollar and enhance the yuan’s role in global trade. At the SCO 2024 summit, China has been a vocal advocate for this transition, with Russia standing firmly in support. For China, this move is part of a broader strategy to strengthen its economic influence within the SCO and beyond.
The Broader Implications for the US Dollar
The implications of these shifts extend beyond India and China, potentially impacting the global financial landscape. The value of the US dollar is intricately tied to its demand in global trade. As more countries within the SCO and other international forums begin to favour local currencies over the dollar, the latter’s value in forex markets could decline. This potential decrease in demand for the dollar underscores the strategic importance of the ongoing de-dollarization efforts. It highlights the geopolitical tug-of-war between maintaining traditional financial hierarchies and embracing new economic paradigms.
The SCO 2024 summit has become a microcosm of the global economic and geopolitical shifts. India’s cautious approach, China’s assertive de-dollarization push, and Russia’s supportive stance reflect complex national interests and strategic objectives. These dynamics will shape global trade and financial systems through summit outcomes.
