Russian state-owned media outlet Sputnik News blamed the Reserve Bank of India’s reduction in holdings of U.S. Treasury securities on “weaponization” of the U.S. dollar. However, Reuters had already reported that India and other “emerging economies” had slightly reduced their holdings of U.S. Treasuries in order to prop up their own currencies.
According to Sputnik, this is being done to retaliate against U.S. “weaponization of the dollar.” While even some Western media have raised concerns about such “weaponization,” it is clear in their reporting that other factors are at work in India, some of which have little to do with the U.S.
Sputnik characterized India’s reduction as “drastic" Reuters cited a reduction from $148.9 billion in May to $147.3 billion in June. The largest drop was in April this year, when India reduced its holdings by $4.3 billion – hardly drastic.
Reuters cited financial expert Gennady Goldberg, who said countries like India are most likely selling off U.S. securities in an effort to prop up their own currencies. Reporting on India’s reduction in U.S. Treasury securities in July, Economic Times cited both domestic and external factors for the trend in selling off securities.
There is, however, one major factor in India’s financial action that does have an American connection -- the Turkish Lira crisis. This crisis has been cited as a major factor in the Indian rupee’s recent plunge against the dollar. The immediate cause of the lira’s woes is the breakdown in U.S.-Turkish relations, which was triggered by sanctions and threats of higher tariffs on Turkish exports in August. And one expert cited by Al Jazeera actually used the term “weaponization” regarding the dollar when speaking about the lira collapse.
However, Reuters reported that India was one of six “emerging markets” by June had reduced their holdings of U.S. Treasuries, but that the June numbers represented holdings of the six countries which preceded the flare up of U.S – Turkish relations.
‘Weaponization’: Sanctions, not Securities
While Putin’s government and media have claimed for some time that the U.S. was “weaponizing” the dollar, recently even some Western analysts have made the argument. And former banker Saryajit Das, described by Bloomberg as “one of the world’s 50 most influential” figures in the financial industry, wrote an op-ed published by Bloomberg stating the U.S. “is weaponizing the dollar to preserve its global economic and geopolitical position.”
Das made no mention of India’s dumping of U.S. Treasuries but did point to sanctions targeting people, business entities, organizations and entire countries.
“This gives the nation extraterritorial reach over non-Americans trading with or financing a sanctioned party,” Das wrote.
The term, “weaponization” also came up in an article in Forbes by Charles Wallace, on the topic of countries like Russia, Iran, and Turkey announcing plans to trade in local currencies rather than dollars. This notion that those countries would move away from the dollar has been discussed by Russian leaders for many years now, usually in relation with countries such as China, Turkey, and Egypt. It has been brought to the forefront due to the Trump administrations imposition of sanctions on Iran and Turkey. Trading in local currencies would make such countries less dependent on the dollar, but this also carry serious risks as well, given that these currencies tend to be less stable.
Back to the topic of this fact check: India.None of the analyses we point to cite U.S. currency “weaponization” as a reason for India’s sell off.Nor is the Turkish lira crisis, which others have blamed on the U.S., the only factor in the Indian rupee’s recent decline. And so we find Spunik’s claim was false.