India’s Maiden Rupee Payment for UAE Oil Signals Global Currency Aspiration

Ira Singh
Khabar Khabaron Ki,26 Dec’23

India, the world’s third-largest energy consumer, has initiated its debut payment in rupees for crude oil obtained from the United Arab Emirates (UAE), marking a significant stride in its pursuit to promote the local currency on the global stage.This unprecedented transaction marks a pivotal moment in bilateral trade between the two nations and signifies a significant departure from the traditional mode of settling transactions in widely used global currencies.

The move is part of India’s broader efforts to diversify oil suppliers, cut transaction costs, and establish the rupee as a viable trade settlement currency. This initiative aligns with the Reserve Bank of India’s move on July 11, 2022, allowing importers to pay in rupees and exporters to receive payments in the local currency.

Officials have reportedly stressed that internationalisation is an ongoing process, and currently, there are no specific targets.

With over 85 per cent of its oil needs reliant on imports, India has adopted a multifaceted strategy, emphasising sourcing from the most cost-effective suppliers, diversifying supply sources, and adhering to international obligations. The nation’s approach proved advantageous during the ramp-up of Russian oil imports, saving billions of dollars.

In July, India formalised an agreement with the UAE for rupee settlements, leading to the Indian Oil Corporation (IOC) making payments for purchasing one million barrels of crude oil from Abu Dhabi National Oil Company (Adnoc) in Indian rupees. Additionally, some Russian oil imports have also been settled in rupees.

More such deals may happen in future, the officials reportedly said.