Monday, February 13, 2012

India - Iran Rupee Trading : Mechanism and Benefits

As a follow – up for the Yesterday’s post about Oil trading between India and Iran, I would like to specify rupee trading system and the developments taking place in this regard and how will this benefit our country.

As a recent development proposes, India and Iran governments successfully worked out Rupee trading mechanism for payment of India’s oil imports from Iran, rather than using the US Dollar and this development comes into practice in two months. The reason for Rupee trading – US and EU’s sanctions on Iran and the countries trading with them.


“Whatever oil India imports from Iran and for that oil whatever money India is supposed to pay, part of that amount will be retained in a bank in India. Thereafter, any Indian who exports to Iran need not have to bother about some US bank. Once (export) documents are negotiated, the designated Indian Bank, where the money will be kept, will pay the exporter the equivalent amount in Indian currency.” says Anup Pujari, Director General of Foreign Trade in a press conference.

This decision was taken after a bilateral meeting between Iran and Indian officials as trade cannot be done using International Standard Currency, the US Dollar, as a consequence of economic sanctions imposed by United States on Iran. Rahul Khullar, the Union Commerce secretary expressed a concern that oil imports from Iran is enough for only 20 to 25%, thus emphasizing the fact that India is looking for an increase in the amount of exports to Iran.

As the so called barter system is coming into effect in 2 months, there are a small amount of pros and cons of this system.


Indian imports and foreign trade with Iran will no longer be dependent on American Dollar or EU’s Euro, thereby alienating itself from any fluctuations in the major currency values of the world.

US’ impact on oil trading and its grip on world oil trade will be in question and India will be least affected in terms of oil imports from Iran.


Drawing US’ wrath by trading with Iran despite its objections is one major blow to India and its policies.

The civil nuclear co-operation, military sales and dealings and other economic benefits that India receives from US may be at stake or else will at least be affected because of this move by Indian government.

Time will answer the response of United States government regarding this and how this deal shapes up will get interesting in the near future.

Anup Pujari’s Comments : from The Hindu.

Image Courtesy: Google.




  1. You have a gift of explaining complex things in a simpler manner..also thank you for adding references...

    but what I wanted to say regarding references... is

    if I wanted to read more about this would be great if u can post some web links directly after your writing so that we can immediately look at it..

    It is interesting and we should see as to how US reacts to this ?

    ALso, I feel trading in India currency should increase...which would reduce the effect of USD..but again our credit rating & politicians play a role

    such sad state of affairs that we cannot call our politicians as policy-makers :(

    1. i ll provide them dude. i haven't actually browsed anything to write this because all this data is from news and paper. so..

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