After tightening U.S. sanctions made it difficult for New Delhi to pay Iran for oil in dollars, Tehran agreed to accept nearly half the payment in Indian rupees.

The arrangement became operational recently. Rafique Ahmed with the Federation of Export Organizations of India says it will give a major boost to trade between the two countries as Tehran will have to use the rupees it earns from Indian oil companies to buy goods from New Delhi.

“The oil companies have started to put the money in the rupee account and the flow of trade has started. They have deposited about $550 million,” said Ahmed. “They are expecting more flow of money to come in.”

Iran has been scouting for goods to buy with the Indian currency. In May, an Iranian trade delegation visited New Delhi to identify potential imports.

India mostly sells rice, sugar, pharmaceuticals and medical equipment to Iran. New Delhi is also considering selling wheat from its overflowing stocks. Indian traders say Iran could potentially become a big market for items such as tea, yarn, fabric and fertilizers.

Vijay Setia, the head of the All India Rice Exporters Association says some Indian exporters had faced uncertainty about payments in recent months, but those worries have been eased since an Indian bank began issuing lines of credit (LC) for exports to Iran.

“This is a sure payment – that you will get your payment,” said Setia. “And, confidence of bank LC is definitely there and business is safe now, in a safe mode. They are feeling more secure.”

He says rice exports to Iran had slowed down. But he expects more rice to go to Iran in the coming months.

In a bid to encourage exports to Iran, India has also put in place tax incentives for its traders.

Indian exports to Iran reached some $2.5 billion in 2010. But they will have to nearly double to about $5 billion if Tehran is to use up the rupees to be paid for the Iranian oil.

6 Comments on "India pays for Iranian oil in rupee"

BillT on Tue, 17th Jul 2012 12:57 pm 



The end of the dollar is in sight…

B2B Store (India) on Tue, 17th Jul 2012 6:08 pm 



Thanks for sharing. Hope that Oil Price dont keep going up.

Arthur on Tue, 17th Jul 2012 7:00 pm 



India is a little too big to bomb in oblivion. And the US has been printing too much money lately. Several other countries are in a process of currency transition, even Gulf states.

http://www.commodityonline.com/news/china-and-uae-ditch-us-dollar-will-use-yuan-for-oil-trade-45444-3-45445.html

James on Tue, 17th Jul 2012 9:15 pm 



And so it begins. The fall of the “mighty dollar”.

DMyers on Tue, 17th Jul 2012 11:00 pm 



Agreed, this seems to point to a dollar demise. Arthur, however, missed the more crucial point. Bombing India would destroy a vast majority of American customer service/technical support telephone operators. Our military/industrial complex decision makers would probably miss the too big to bomb problem, but they are very sensitive to the importance of cheap skilled labor for America’s corporate interests.

Arthur on Wed, 18th Jul 2012 1:06 pm 



DMyers, I am not serious in suggesting that the US would even contemplate the only sort of ally they potentially might have in Asia, namely India. And the reason for the potential alliance is the neighbour-antagonism India has vis-a-vis China and Pakistan.

If WW3 will happen, it will initially be between Anglosphere + Gulf satraps against SCO (Iran, China, Russia, in that order). Continental Europe (and Japan) will try to stay out as long as possible. But Russia has the better cards to draw Europe into it’s orbit, because of fossil fuel deliveries, first and foremost Germany. France will likely follow. Later on the muslim world will choose the side of SCO. India could choose the side of Anglosphere.