Media reports suggests that India has agreed to pay the price of crude oil it imports from Iran in gold, which makes it the first country to drop the US dollar for purchasing the Iranian oil.
Citing an Israeli intelligence website, The Times of India has reported that India is opting for gold to repay crude oil supplies from Iran. The website, Debkafile, said the transaction will be routed through UCO Bank, the Kolkata-based public sector lender.
However, the authenticity of the news could not be confirmed as the Indian government has neither confirmed nor rejected the option of paying in gold for oil imports from Iran.
India, which is highly dependent on imports to meet its crude oil consumption needs, is Iran’s second-largest oil customer after China and purchases around $12 billion worth of Iranian crude every year, about 12 percent of its consumption.
On Dec. 31, 2011, US President Barack Obama signed new sanctions into law, seeking to penalize countries importing Iran’s oil or undertaking transactions with the Central Bank of the Islamic Republic of Iran.
EU leaders also endorsed the latest restrictive measures against Iran. The leaders of the 27-member bloc briefly touched upon foreign relations during the summit held in Brussels, mentioning sanctions adopted by the EU Foreign Ministers on Jan. 23.
Analysts say that the US and the European Union’s sanction against Iran is a move aimed to ramp up pressure on the country’s much disputed nuclear program.
The controversy over Iran’s nuclear programs has been the focus of news for a while. A majority of the international community is at odds with Iran over its nuclear program because of its history concealing its nuclear activities, but Iran insists its program is aimed at developing technologies for peaceful purposes.
According to the Times of India article, India has decided to explore payment options for oil imports from Tehran and will only abide by U.N. sanctions and not those imposed by any other bloc of countries.
India’s Petroleum Minister S. Jaipal Reddy reacted to the European Union’s sanctions against Iran in the article, saying New Delhi would continue to explore “options” for paying Tehran for its oil imports. Among those options is to do business using Indian currency on the lines of the arrangement with Russia in the past.
New Delhi and Tehran have been debating options for Indian payments for over a year now, since the Reserve Bank of India banned Indian firms from using the Asian Clearing Union to pay for oil imports from Iran in December 2010.
Iran is one of the world’s leading producers of both natural gas and oil; it is OPEC’s second-largest oil producer and exporter after Saudi Arabia and, in 2010, was the world’s third-largest exporter of oil after Saudi Arabia and Russia.
Iran has 40 producing fields, 27 onshore and 13 offshore, with the majority of crude oil reserves located in the southwestern Khuzestan region near the Iraqi border.
OPEC’s oil reserves of 1.19 trillion barrels as of 2010 make up 81.3 percent of the world’s total oil reserves. Among OPEC nations, Venezuela has the largest reserves, totaling 296 billion barrels, and Saudi Arabia has the second-largest at 264 billion barrels. With reserves of 151.2 billion barrels, Iran has 12.7 percent of the world’s total oil reserves.
India and China take about one million barrels per day (bpd), or 40 percent of Iran’s total exports of 2.5 million bpd — and both India and China have huge reserves of gold.
By. TC Malhotra
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