If we are to understand the salience of the aggression on Iran (as well as Venezuela) that the US-Israel combine has wreaked upon the global economy, India’s economic foreign policy makers need to understand the context of the emergence of the Petrodollar System that started functioning in the early 1970s. This understanding is essential to India’s ability to respond appropriately today, and protect the interests of India and the global south, of which we claim to be a leader. In fact, if we still take our chairmanship of BRICS in 2026 seriously, this becomes even more important.The petrodollar system emergesThe dollar emerged after the Second World War as a dominant currency, as it was the only major economy that was left unscathed by war. But by the early 1960s, both Europe and Japan had restored their industrial power, and the US’s old industry could not stand up to their newer factory competition. American industrial decline was accompanied by rising trade deficits, and the US began to print more dollars to pay for them. But the Bretton Woods system – created by the Allied Powers after their victory – had also ensured that dollar reserves were convertible into gold (held by the US Federal Reserve). However, the US’s industrial decline, combined with imperial military overreach (e.g. Vietnam war), led to further deepening of the trade deficits. By 1971, the convertibility to gold was abandoned by the US President Richard Nixon. The availability of the US dollar had made it an international currency by then. The collapse of the dollar’s convertibility to gold could have threatened its dominance. However, a clever diplomatic ploy by the US with Saudi Arabia, and later OPEC, only revealed recently, ensured that the Saudis would only accept the payment for oil sales in dollars. The US would offer security protection in return; thus bringing US bases to the Gulf (as in East Asia/Europe). That has sustained global demand for the US dollar as almost all countries import oil, and hence need the American currency. This also enabled the US to maintain huge budget deficits, low domestic savings and massive import surplus – supported by global demand for dollars (which the US could print) as well for US Treasuries – thus, financing US budget and current account deficits.Economic sanctions: misuse of the petrodollarTrump opposes de-dollarisation, as this exorbitant privilege enjoyed by the US enables it to maintain imperial power, and impose economic sanctions and freezing of assets on countries across the globe ever since then. The US has imposed economic sanctions since the Cold War for a variety of reasons: ideological grounds (Cuba, Vietnam, Libya); counter-terrorism and security concerns post-2001 (Afghanistan, Iran, Sudan); great power competition post-2014 (Russia, China); and increasingly through the 2010s–2020s as a tool of financial warfare (Venezuela, Iran via banking isolation, and Russia under the largest sanctions regime ever imposed). By 2025 the most heavily sanctioned countries were Russia, Iran, North Korea, Syria, Venezuela. Even India could not escape this as ‘secondary sanctions on third parties’ prevented India from buying Iranian oil from 2019-2026 and forced India to backtrack from its investment in Chabahar port and route to Afghanistan, Central Asia and Russia. The recent additional 25% tariff on India for buying Russian oil in 2025 is in the same category, however short-lived and narrow in scope.Damaging Effects of sanctionsA study in Lancet (2025) estimated a significant causal association between sanctions and increased mortality. The study used a panel dataset of age-specific mortality rates and sanctions episodes for 152 countries between 1971 and 2021.They found the strongest effects for unilateral, economic and US sanctions, (but no statistical evidence of an effect for UN sanctions). It estimated that unilateral sanctions were associated with an annual toll of 564,258 deaths, similar to the global mortality burden associated with armed conflict over that 50 year period. That means around 28 million excess deaths, mostly of children and elderly, over that period only on account of US economic sanctions. That alone should be treated as a war crime. This has nothing to do with wars of aggression or regime changes that the US (and West) has together engineered over the years.India and the BRICS: What should be our priorities?India is risking global and BRICS isolation by siding with US/Israel (not just on aggression on Iran). India’s economic diplomacy is at the crossroads, because of the foreign policy decisions we are taking without regard to India’s development imperative and our commitment to strategic autonomy principle, which is the essential plank of our foreign policy. The principle of “India First” requires that we pivot towards the BRICS. We have shown some foresight by reviving the IBSA (India, Brazil, and South Africa) idea in the last BRICS summit. Why India must reassert its strategic autonomy:It will reduce economic vulnerabilities for all BRICS/Emerging Market and Developing Economies (especially Iran and Saudi Arabia) in an economic sanctions driven world. A wayward hegemon, the US, under Trump has been running amok. Sanctions have been imposed on Iran, Russia, China, Cuba and others. India is a Low Middle Income Country (LMIC) and the only LMIC that is a BRICS member and too populous to suffer sanctions. Reduce risk to India’s growth: India is subject to Iran sanctions. We haven’t bought oil from Iran since 2019. We have also abandoned the Chabhar port project, which would have given us access to Afghanistan, Central Asia and Russia, without going through hostile Pakistan. All because our policy leadership decided to side with Israel/US.Reduce pressure on trade deal with US: India has signed a one-side Interim Trade Deal on February 7 with the US, which has its own set of problems 18% on our exports vs 0% tariffs on US exports to India; India accepted it will import $500 bn worth of goods over five years; Opening India to agricultural exports of US (feedstock, cotton, etc); Conditions on who we buy oil from – Russia was sanctioned, so was India (50%). We even accepted the term in the Interim Agreement with the US that it will be “watching” Indian imports of oil. India risks losing pre-eminence to China if India does not act now: The use of Chinese payments system (CIPS) is growing as an alternative to the Petro dollar. Iran and Venezuela are selling oil to China against the Yuan. What is required is a neutral currency that BRICS can propose to accelerate de-dollarisation. If this trend towards the use of Yuan continues, India risks it will establish Chinese currency as an alternative to petrodollar. That will undermine the prospect of a common Central Bank Digital Currency (CBDC)-based currency for trade. India therefore needs to take the initiative to revive the Russian proposal at the forthcoming BRICS summit later this year.There is a higher risk of higher borrowing cost for EMDEs under the petrodollar system. Developing regions are continuing to borrow at rates that are significantly higher than those of developed countries – even if factual risk profiles are at comparable levels. Advanced countries borrow in their own currency while EMDEs borrow in foreign currency. Hence, there is a forex rate risk of depreciation: this is the reason for interest rates being higher for the EMDEs.India’s assertion of Strategic Autonomy on this financial matter is not meant to be anti-US, it is meant to preserve our scope for independent action, which is in the interest of all BRICS and EMDEs. It means developing an alternative to SWIFT as a means of settling balances. This will involve the following stages in their evolution: a bilateral trade involving partner currencies, balances settled in dollar or Euro, followed by a move towards CBDC-based currency, linked to gold.Strategic autonomy and ‘India first’ – both principles that should be driving India’s foreign policy – require India to pivot to BRICS to safeguard our economic interests.Santosh Mehrotra is a former Prof of Econ, JNU; a Visiting Prof at the Higher School of Economics, and Research Fellow, IZA Institute of Labour Economics, Luxembourg.