India, UAE make first crude oil trade in local currencies

"Trade in local currencies paves the way for enhanced economic collaboration and will make international financial interactions simpler,” said PM Modi on July 15.

Published: 15th August 2023 09:00 AM  |   Last Updated: 15th August 2023 09:00 AM   |  A+A-

Crude oil

Image used for representational purpose only.

Express News Service

NEW DELHI: Exactly a month after Prime Minister Narendra Modi and President of the UAE, Sheikh Mohamed bin Zayed Al Nahyan, signed a Memorandum of Understanding on trade in national currencies, the Abu Dhabi National Oil Company (ADNOC) and Indian Oil Corporation Limited (IOCL) made their first-ever crude oil transaction in national currencies.

The transaction involved sale of one million barrels of oil. “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,” according to the Indian Embassy in Abu Dhabi.

“Trade in local currencies is a very important aspect of India-UAE cooperation. It paves the way for enhanced economic collaboration and will make international financial interactions simpler,” said PM Modi on July 15.

The UAE is one of India’s key partners in the oil and gas sector, which is significant for India’s energy security. Petroleum products form the bulk of trade between the two nations. The UAE is the fourth largest source of crude oil and second largest source for LNG and LPG for India. In 2022 $35.10 billion worth of petroleum products were traded between the two – which made up for 41.1 per cent of the total bilateral trade.

“This LCS and is expected to reduce transaction costs and time and increase reliance on local currencies. This will add to the preferential terms accruing from CEPA and traders can choose payment currency based on mutal agreement,’’ the Indian Embassy statement added.

Monday’s transaction is the second under LCS. The first one took place on July 15 the day the MoU was signed and involved the sale of 25 kg of gold from a leading UAE gold exporter (Peekay Intermark) to a buyer in India (YES Bank). This was valued at `12.84 crore.  Meanwhile, the trade between the two nations rose to $85 billion in 2022, making the UAE India’s third-largest trading partner for 2022-23 and India’s second-largest export destination. India is the UAE’s second-largest trading partner. 

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