India and the United Arab Emirates Crude oil Transaction in Rupees

India and the United Arab Emirates have started settling bilateral trade in their local currencies with India’s top refiner making payment in rupees for purchase of a million barrels of oil from the Middle Eastern nation, the Indian government said.

Indian Embassy Statement

Indian Oil Corp (IOC.NS) made payment to Abu Dhabi National Oil Company (ADNOC), according to a statement issued by Indian embassy in UAE. The transaction comes after one involving the sale of 25 kg gold from a UAE gold exporter to a buyer in India at about 128.4 million rupees ($1.54 million).

In a major development for the trade relations between India and the United Arab Emirates (UAE), both countries will now settle their crude oil transactions using their respective national currencies.

According to the Indian Embassy in Abu Dhabi, the UAE’s Abu Dhabi National Oil Company (ADNOC) and Indian Oil Corporation Limited (IOCL) made their first-ever crude oil transaction in national currencies.

“The first-ever crude oil transaction under the newly implemented Local Currency Settlement (LCS) took place on Monday between the ADNOC and IOCL. The transaction involved the sale of 1 million barrels of crude oil. Both Indian Rupee and UAE Dhirams were used in the transaction,” the Indian Embassy in Abu Dhabi said in a press release.

India And UAE MoU

The Memorandum of Understanding (MoU) signed when Indian Prime Minister Narendra Modi visited the country last month following his trip to the United States.

UAE is the fourth largest source of crude oil and the second largest source of LNG and LPG for India. Last year, USD 35.10 billion worth of petroleum products were traded between the two countries, accounting for 41.4 per cent of total bilateral trade.

This is India’s first-ever LCS and is expected to reduce transaction costs and time and increase reliance on local currencies. This will further add to the preferential terms accruing from CEPA. Traders can choose the payment currency based on mutual agreement.

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