UAE explores non-oil trade in Indian rupees, sees major role for crypto

The United Arab Emirates and India are discussing ways to boost non-oil commerce in rupees as the Gulf country looks to strengthen ties with its second-largest trade partner.
“We are still in early-stage discussions with India on this dirham-rupee trade,” Thani al-Zeyoudi, the UAE’s Minister of State for Foreign Trade, told Bloomberg Television in Davos, Switzerland. Another area he spotlighted in a separate interview on Friday is the role of cryptocurrencies in commerce.
“Crypto will play a major role for UAE trade going forward,” al-Zeyoudi said. The UAE — and especially Dubai — has been working to lure the world’s largest firms with its crypto-friendly policies.
“The most important thing is that we ensure global governance when it comes to cryptocurrencies and crypto companies,” al-Zeyoudi said. “We started attracting some of the companies to the country with the aim that we’ll build together the right governance and legal system, which are needed.”
The UAE has been seeking to step up trade with crucial partners and last year signed multiple economic pacts with countries including India, Indonesia, Turkiye, Israel and Ukraine. In the coming months, the UAE expects to finalise similar agreements with Cambodia and Georgia, al-Zeyoudi said.
The economic agreements are set to boost the UAE’s gross domestic product by 3.4% to 3.8% by 2030, he said.
Opec’s third-biggest producer has long maintained a currency peg to the dollar and most trade in the Gulf is settled in the US currency. Total bilateral trade between the UAE and India was nearly $64bn in 2021, according to data compiled by Bloomberg.
Oil sales in the Indian currency are “not under consideration,” al-Zeyoudi said. “This is only going to be focusing on non-oil trade.”
Al-Zeyoudi’s statement echoes that of neighbouring Saudi Arabia. Earlier this week, Saudi Finance Minister Mohamed al-Jadaan said the kingdom is open to discussions about trade in currencies other than the US dollar.
The dollar’s strength in the first half of last year and its weaponisation to enforce sanctions on Russia has given fresh impetus to some of the world’s biggest economies to explore ways to circumvent the US currency. China has looked to bolster the yuan’s global appeal and has been pushing to boost its use in transactions with major energy and commodity exporters.
Discussions on a trade agreement with China are also taking place, the UAE minister said.
“China is our first trade partner,” he said. “For sure, more is going to be good for consumers, for workers, for people, for businesses.”
The UAE and neighbouring Gulf countries look relatively resilient to the risk of a global recession this year, mainly due to massive oil bounties they collected in 2022 and measures they have taken since the Covid-19 pandemic.
Dubai, part of the seven emirates comprising the UAE, has seen an influx of businesses, entrepreneurs and tourists over the past couple of years.
The UAE is “very immune” if a recession in the world economy materialises in 2023, al-Zeyoudi said. “We did excellently last year, and we’re going to have an excellent performance this year as well.”
The government will also start imposing a 9% corporate tax later this year, a rare move in a region otherwise known for being tax-free. The UAE said it would slash other fees to offset the impact of the levy.
“There will be an overlap for some time between the normal fees and the corporate tax,” al-Zeyoudi said. “It’s the first time we are applying it, it’s going to take some time.”