WHY DOES INDIA WANT TO TRADE OIL WITH IRAN IN RUPEES

The Indian government has been working on a plan to trade with Iran in rupees and the first test of this will be the sale of crude oil to India The Iranian government has given permission to the Indian government to use Indian rupees in the payment of crude oil imports from Iran The payment will be carried out through the rupee-rial account This arrangement is expected to be a big boost for the rupee as the Indian rupee will become a recognised global currency The International Monetary Fund (IMF) has also agreed to the USD-free trade with Iran and has given its approval in this regard to the Indian government The rupee-rial account will be a beneficiary of the IMF decision The rupee-rial account was activated by the Reserve Bank of India (RBI) with an aim to facilitate the trade between India and Iran and the opening of the account was a part of the payment mechanism under the India-Iran-Afghanistan Trilateral Agreement on Establishment of International Transport and Transit Corridor The rupee-rial account was expected to be a part of the India-Iran-Afghanistan Agreement on Trade, Transit and Investment The new mechanism is expected to bring down transaction costs, simplify procedures, reduce the turnaround time and reduce the double-payment problem Iran is India's third-largest oil supplier after Iraq and Saudi Arabia In 2013 the India has imported about 5.8 million tonnes of crude oil from Iran The Iranian government wants to increase this to two million barrels per day It is believed that the rupee-rial account could become a part of the payment mechanism for India-Iran crude oil trade The rupee-rial account is expected to bring down the cost of imports and exports between India and Iran https://m.economictimes.com/news/economy/foreign-trade/india-imports-5-82-million-tons-oil-from-iran/articleshow/27536653.cms It is believed that the rupee-rial account will reduce the transaction costs considerably and will also save time as the payment will be made only once The rupee-rial account is expected to further deepen the trade ties between India and Iran Trump sanctions against Iran cut off oil to India. Iran’s petroleum  output has increased to I million barrels per day and it is seeking other markets, which were blocked after US imposed sanctions on them. India has been the second biggest buyer of Iranian oil after China before sanctions were imposed in 2019. The bilateral trade between the two countries during 2020-21 was $2.10 billion, a 56%  decline compared to the previous year of $4.80 billion. While India exports rice, tea, sugar and fresh fruits, pharmaceuticals, machinery, jewellery to Iran, imports include dry fruits, chemical glass, semiprecious stone and leather. https://www.newindianexpress.com/nation/2022/jun/09/crude-oil-imports-may-figure-in-india-iran-talks-2463508.amp In the pandemic year 2020-21, over 84 percent of India’s petroleum product demand (crude oil and petroleum products) was met with imports. Gross petroleum imports of about 239 million tonnes (MT) of value US$77 billion accounted for over 19 percent of India’s total imports in 2020-21. in 2020-21 India sourced crude oil from 42 countries. The top oil exporter to India in 2020-21 was Iraq followed by Saudi Arabia.  Iraq’s share in India’s imports increased from about 9% in 2009-10 to over 22% in 2020-21. Saudi Arabia’s share has remained steady between 17-18% of India’s imports over a decade The entry of the USA as India’s 4th largest source of oil imports breaks the trend of Saudi Arabia, Iraq, Iran, Kuwait, the UAE, Nigeria, and Venezuela dominating India’s top five oil import sources for over two decades. Since 2020, Iran was no longer among the top 20 oil importers to India https://www.orfonline.org/expert-speak/indias-oil-imports/?amp