No More Dollars In UAE-India Oil Trade

The United Arab Emirates and India signed the first oil contract denominated in dirhams and rupees, not dollars. In an innovative deal, the Abu Dhabi Oil Company (ADNOC) will deliver about a million barrels of oil from the Indian Oil Corporation IOCL, whereas payments will be made exclusively in the currencies of the two countries.

This is the first oil contract with the UAE in the history of India denominated in local currencies. Payments in rupees and dirhams instead of dollars will make it possible to lower the cost of banking operations, as well as significantly reduce the time for crediting funds. According to a representative of the Indian Embassy in the UAE, “mutual settlements in the currencies of India and the UAE will increase the weight of the rupee and dirham in international trade.”

Last July, during an official visit to Dubai by Indian Prime Minister Narendra Modi, India and the United Arab Emirates signed two memorandums of understanding aimed at strengthening the use of national currencies in bilateral trade. In addition, the interbank telecommunication systems of the two countries will be interconnected.

The UAE is the fourth largest oil supplier to India, exporting $31.5 billion worth of oil to Indian traders last year.

To be more precise, the contract for the sale of oil was the second one denominated in national currencies. The first to be denominated in rupees and dirhams was the sale of 25 kg of gold exported from the United Arab Emirates to Indian jewelers.