Major Shaitan Singh
SENIOR MEMBER
- Dec 7, 2010
- 3,550
- 43
- Country
- Location
India has reportedly agreed to pay Tehran in gold for the oil it buys, in a move aimed at protecting Indians from the US-led financial sanctions targeting Iran. China, which also refused to side with the oil embargo, may follow Delhis lead.
The move comes as a surprise, reports Israeli-based news website DEBKAfile, since earlier India and Iran said they would switch to yen and rupees in their trade. The report says backup alternatives are being negotiated with China and Russia, should the US and EU find a way to block the gold payment mechanism.
India and China need to switch from the dollar in bilateral trade, since the US and EU have issued unilateral sanctions against the Iranian oil industry and financial institutions. The sanctions would ban any bank involved in oil trade with Iran from dealing with American and European counterparts.
Both India and China, two major buyers of Iranian oil accounting for 22 and 13 percent of its total export respectively, have refused to join such sanctions. This means they have to establish a reliable way of paying for crude, independently of the parts of the global financial system controlled by New York and London.
Delhis current plan is to effect payments through two state-owned banks, Indias UCO Bank and Turkeys Halk Bankasi, Turkey being another country refusing to join the sanction spree.
The US issued sanctions against Iran in December, aiming to put pressure on the Islamic Republic and make its controversial nuclear program more transparent. The EU joined the initiative on Monday, banning new oil contracts with Iran, but allowing current ones to be fulfilled.
Japan and South Korea, two other major buyers of Iranian crude, are in talks with Washington over the issue, although both Seoul and Tokyo are worried that stopping their imports could hurt their economies.
Iran, which is highly dependent on its sales of oil, is reacting to the sanction campaign nervously. Tehran says it will not yield to pressure, and threatens to block the Strait of Hormuz, a key oil tanker route in the Persian Gulf.
