Iran agrees to take all oil payments from India in rupees

[AADHAAR]

No buddy, It's only good for India, not Iran.It will reduce Iran's bargaining power for importing goods, it forces Iran to neglect some other high quality goods on the market and consider the Indian equivalent. I hope these sanctions end as soon as possible so that Iran can decide what to do with its oil money, and that wouldn't be a limited set of products of one specific country.

It's fair to both India and Iran ... and circumvents western sanctions.

The international price of oil is set in USD .. and USDINR is highly liquid market. The USDINR rate is set by the market, not pegged by government of India or the RBI.

Given that, Iran continues to be paid a USD-equivalent price .. which it cannot get directly due to US sanctions.

Other currencies e.g. USDCNY is a pegged currency .. and (i) its true value is anyone's guess, (ii) PRC govt can change the peg anytime ... causing heavy losses to anyone who bets that CNY will only appreciate.

Iran is permitted to deploy its rupee holdings in Govt of India debt .. which is again a highly liquid market (just like US treasuries, although GoI does not permit foreigners to own sovereign rupee debt except some FIIs).

The returns on sovereign rupee debt earn an interest rate comparable to rate of inflation .. hence, the actual rupee holdings do not lose value with time (in fact earning a small real rate of interest).

GoI debt earns around 7-8% p.a. so even if Iran imports on a deferred basis, it keeps the value of its rupee holdings intact.

Next, if and when US sanctions are over, it can convert the rupees back to USD at the prevailing rate of exchange. Because India will treat Iran's rupee holding just like NRI deposits which are rupee denominated.

Given the relative cheapness of things in India due to rupee trading at 60 to the USD, NRI find it highly lucrative to rush into owning rupee assets (they earn around 9% in bank FDs, which are off course have less credit than sovereign debt).

Similarly, Iran will be paid for its oil at USD-equivalent price but earning 60 rupees for the dollar .... so you get your basmati rice or pharmaceuticals or cement for less oil than say one year back. And the 55 rupees to the dollar which you earned last year, already increased to 60 due to the interest rate on GoI debt.

Iran is treated fairly, and India is the most liquid market that it can trade with.

Yes, for India its good ... or actually just fair. Iran can now own GoI securities, just like Japan or PRC holds US Treasuries.

Iran's exposure to India .. .is same as Japan's or PRC's exposure to US treasuries.

India doesn't like foreigners to own GoI rupee debt ... just an exception is made for Iran, since the size of its holdings are expected to be quite small compared to the overall size of GoI securities market.

 

[Echo_419]

Good Tine to trash US dollar

 

[Rajaraja Chola]

Will you refuse, to sell in USD?

Can some one explain me this strange type of so called sanctions? You are permitted to sell in Indian currency and you are forced to buy only from India?

No. They can also buy from nations, who agree to use Indian money for exchanging. Sanctions can cover only the transfer of US dollars, as it is by US govt. And EURO is also under sanctions I guess by EU.

The statement you highlighted from my post, is, using rupees, Iran can buy anything from India, without much hassles. The money is in a Indian bank, and it can be transacted without much fuss.

FOr ur question, we can sell in dollars , as its the primary exchange currency all through the world. But if we can agree to do business in local currencies, then it s good, i believe.

 

[illusion8]

That's what I said in my post, the only way is to ease sanctions on central bank of Iran and other major companies.

Yeah - the point is you do not have options to pay as well for your purchases other than pay in oil or gold. India is what - your second biggest importer of oil (I am not sure)? I agree its a tight situation, but then its symbiotic - you export we import - we export you import.

 

[neehar]

good..now our trade deficits decreases and rupee value increases..all the rupees which we used to buy the oil will be used by them to buy indian products back so that our currency gets back in to our economy..good move..escape from sanctions for iran and increase of exports and improving currency value for india..

 

[Manindra]

Why i'm no problem in extending transit aid to YOU... worth billions of $.

I don't want guarantee of your but your Generals

 

[rubyjackass]

Good news for iran

I mean lessons learned , for iran

Would you please elaborate and let us know what the lessons are?

 

[rubyjackass]

That's what I said in my post, the only way is to ease sanctions on central bank of Iran and other major companies.

But to be fair to the rupee, it already hit rock bottom. It will only appreciate now. But I agree Iranian currency deal definitely will lift rupee's value up a notch.

 

[American spying]

Iran is screwed. That's why they are forced to use a collapsing currency such as the Rupee.

 

[Bhai Zakir]

PressTV - India to settle oil trade dues with Iran in rupees