In a historic stride, India has achieved a significant milestone by conducting its inaugural payment in rupees for crude oil sourced from the United Arab Emirates (UAE). This momentous event follows a bilateral agreement forged between India and the UAE in July, laying the groundwork for transactions to be settled in the Indian currency. The Indian Oil Corporation (IOC) acted swiftly to implement this groundbreaking arrangement, executing payments for the acquisition of one million barrels of crude oil from the Abu Dhabi National Oil Company (Adnoc) exclusively in Indian rupees.
Noteworthy is India’s extension of this novel payment method to encompass select Russian oil imports, underscoring the nation’s steadfast commitment to positioning the rupee as a pivotal currency in international trade transactions. This paradigm shift in payment dynamics carries profound implications for India’s economic relations with oil-producing nations, signifying a departure from conventional currency settlements.
The strategic move to conduct payments in rupees aligns with India’s broader initiative to promote the global acceptance of its local currency. This move becomes particularly significant when considering India’s extensive economic ties with oil-producing countries. In the fiscal year 2021-22, bilateral trade between India and the Gulf Cooperation Council (GCC) reached approximately $154 billion. The GCC nations, constituting nearly 65% of India’s annual remittances surpassing $80 billion over the last three years, play a pivotal role in shaping India’s economic landscape.
Crucially, the GCC nations, including the UAE, contribute significantly to India’s energy security, accounting for nearly one-third of the country’s oil imports. As India’s reliance on imported fossil fuels continues to grow, predominantly from the Middle East, this strategic shift to conduct rupee payments for crude oil from the UAE and Russia emerges as a calculated move with far-reaching implications for India’s economic ties with key oil-producing nations.
