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.
According to a report published by DEBKAfile news website, unnamed sources have stressed that China is also expected to follow suit.
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 of them have huge reserves of gold.
The report added that by trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its Central Bank’s assets and the oil embargo which the European Union’s foreign ministers agreed to impose on Monday, January 23.
The EU currently buys around 20 percent of Iran’s oil exports.
On the other hand, experts say the vast sums involved in these transactions are expected to boost the price of gold and depress the value of the dollar on world markets.
“An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept [in the] dark,” the report stated.
India is Iran’s second largest customer after China, and purchases around USD 12-billion-a-year worth of Iranian crude, or about 12 percent of its consumption.
Delhi is to execute its transactions, the report said, through two state-owned banks: the Calcutta-based UCO Bank, whose board of directors is made up of the Indian government, the Reserve Bank of India representatives, and Halk Bankasi (Peoples Bank) — Turkey’s seventh largest bank which is owned by the government.
US President Barack Obama signed into law, on December 31, 2011, new sanctions which seek to penalize other countries for importing Iran’s oil or doing transaction with Islamic Republic’s Central Bank.
Foreign ministers of the European Union also imposed sanctions on Iran’s oil imports over the country’s peaceful nuclear program during their Monday meeting in Brussels.
The sanctions involve an immediate ban on all new oil contracts with Iran and a freeze on the assets of the country’s Central Bank within the EU.
Tehran has warned that the embargo will have negative consequences, such as increasing the oil price.
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