Oil Deal Yuan Payment: Amid the relief from US sanctions, India has purchased oil from Iran using yuan instead of dollars. This move could lead to major changes in the global oil trade.
India buys oil in Yuan amid US sanctions
India-Iran Oil Deal: Taking advantage of a temporary one-month reprieve from US sanctions, Indian refiners have purchased oil from Iran. Most notably, this time, payments were made in the Chinese currency, the Yuan, instead of the dollar, marking a departure from previous years. As Indian refiners re-purchase oil from Iran, the method of payment is the most discussed issue in this entire transaction.
Why was the deal done in Yuan?
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The method of payment was particularly significant in this deal between India and Iran. Indian companies paid in Chinese Yuan instead of dollars. According to a report in The Times of India, Indian Oil Corporation (IOC) and Reliance made these payments through ICICI Bank, which was processed by the bank's Shanghai branch. However, the identities of these vendors are not yet clear.
Due to long-standing US sanctions on Iran, making payments in dollars virtually impossible, Indian companies chose the Chinese currency as an alternative to take advantage of a temporary 30-day waiver from the US.
What will India benefit from?
Payments in yuan clearly indicate that India no longer wants to rely solely on the dollar for such transactions. The country is exploring other options, especially when it comes to purchasing oil from sanctioned countries. This deal with countries like Iran in other currencies could open new avenues.
Such steps could lead to changes in international oil trade, where transactions in different currencies could increase, helping to reduce dependence on the US dollar.
America gave relief
Oil prices were rising sharply due to rising tensions in West Asia. The Trump administration has decided to provide some relief. Restrictions on the purchase of Russian and Iranian crude oil already at sea have been temporarily eased, potentially keeping prices under control.
