Historic! In a first, India pays in rupees for crude oil purchased from UAE; spurs global currency aspirations
By Sunita Iyer | First Published Dec 26, 2023, 11:48 AM ISTIndia pioneers rupee payments for UAE-sourced crude oil, signaling a strategic shift to boost the local currency's global role, diversify oil sources, and enhance cost-efficiency.
In a historic move, India has executed its first-ever payment in rupees for crude oil acquired from the UAE, marking a significant step in its efforts to promote the global use of the local currency. This move aligns with India's broader strategy to diversify its oil sources, ensure cost-effectiveness, and adhere to international obligations while meeting its substantial energy needs.
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With over 85 percent of its oil requirements met through imports, India has strategically pursued a three-pronged approach. This strategy involves sourcing oil from the most cost-effective suppliers, diversifying its supplier base, and complying with international obligations, such as price caps in the case of Russian oil.
In A First, India Pays In Rupees For Crude Oil Purchased From UAE.
India in July signed an agreement with the UAE for rupee settlement and soon after Indian Oil Corporation (IOC) made payments for purchase of a million barrels of crude oil from Abu Dhabi National Oil Company… pic.twitter.com/pZ54DIkxOB
India's strategic move to diversify its oil sources paid off during the aftermath of the Ukraine war when it increased imports of Russian oil, which some in the West had shunned. By maintaining flexibility in its oil sourcing, India saved billions of dollars while ensuring a stable energy supply.
To further enhance cost-efficiency, India is now exploring alternatives to the conventional dollar-dominated transactions. By settling trade in rupees, the country aims to eliminate the need for dollar conversions, thereby reducing transaction costs. In July, India formalized an agreement with the UAE for rupee settlement, paving the way for the groundbreaking payment in local currency.
The Indian Oil Corporation (IOC) played a pivotal role in this shift by making payments for the purchase of a million barrels of crude oil from the Abu Dhabi National Oil Company (Adnoc) in Indian rupees. This milestone not only strengthens economic ties between India and the UAE but also sets a precedent for future transactions in local currencies.
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Officials emphasize that the internationalization of the rupee is an ongoing process with no predefined targets. However, they indicate that more such deals, settling trade in rupees, may materialize in the future. This signifies India's commitment to fostering economic partnerships that align with its strategic goals while showcasing the potential for the rupee to play a more prominent role in global transactions.
India's groundbreaking payment in rupees for UAE-sourced crude oil underscores the nation's commitment to strategic diversification, cost-efficiency, and the global promotion of its local currency. As the world's third-largest energy consumer, India's moves in the oil market carry significant implications, showcasing the country's ability to navigate complex geopolitical scenarios while securing its energy future.
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