India to pay gold instead of dollars for Iranian oil.

This article was posted on Debka around 3 hours ago and has since been picked up by several types of media. Any guesses on what happens next?:

India to pay gold instead of dollars for Iranian oil. Oil and gold markets stunned
DEBKAfile Exclusive Report January 23, 2012, 5:57 PM (GMT+02:00) Tags: India China sanctions Iranian oil European Union Iranian oil for IndiaIndia is the first buyer of Iranian oil to agree to pay for its purchases in gold instead of the US dollar, debkafile’s intelligence and Iranian sources report exclusively. Those sources expect China to follow suit. India and China take about one million barrels per day, or 40 percent of Iran’s total exports of 2.5 million bpd. Both are superpowers in terms of gold assets.

By trading in gold, New Delhi and Beijing enable Tehran to bypass the upcoming freeze on its central bank’s assets and the oil embargo which the European Union’s foreign ministers agreed to impose Monday, Jan. 23. The EU currently buys around 20 percent of Iran’s oil exports.

The vast sums involved in these transactions are expected, furthermore, to boost the price of gold and depress the value of the dollar on world markets.
Iran’s second largest customer after China, India purchases around $12 billion a year’s worth of Iranian crude, or about 12 percent of its consumption. Delhi is to execute its transactions, according to our sources, through two state-owned banks: the Calcutta-based UCO Bank, whose board of directors is made up of Indian government and Reserve Bank of India representatives; and Halk Bankasi (Peoples Bank), Turkey’s seventh largest bank which is owned by the government.
An Indian delegation visited Tehran last week to discuss payment options in view of the new sanctions. The two sides were reported to have agreed that payment for the oil purchased would be partly in yen and partly in rupees. The switch to gold was kept dark.

India thus joins China in opting out of the US-led European sanctions against Iran’s international oil and financial business. Turkey announced publicly last week that it would not adhere to any sanctions against Iran’s nuclear program unless they were imposed by the United Nations Security Council.
The EU decision of Monday banned the signing of new oil contracts with Iran at once, while phasing out existing transactions by July 1, 2012, when the European embargo, like the measure enforced by the United States, becomes total. The European foreign ministers also approved a freeze on the assets of the Central Bank of Iran which handles all the country’s oil transactions.
However, the damage those sanctions cause the Iranian economy will be substantially cushioned by the oil deals to be channeled through Turkish and Indian state banks. China for its part has declared its opposition to sanctions against Iran.

debkafile’s intelligence sources disclose that Tehran has set up alternative financial mechanisms with China and Russia for getting paid for its oil in currencies other than US dollars. Both Beijing and Moscow are keeping the workings of those mechanisms top secret

17 comments to India to pay gold instead of dollars for Iranian oil.

  • 4 Liberty

    That sure gives a big universal peace sign to the US and EU. India just put a rather large turd in the punch bowl. Hey folks , the world isn’t intimidated by the U.S. any more . This has huge implications!

  • Two thoughts: First, there is not enough gold in India (or tea in China) to purchase the amounts of oil they need unless they are trading at 1gr a barrel (current exchange rate is about twice that) and even then they will run out fairly quickly and be forced to mass purchase gold off the physical market. ($12B in oil/$1600oz @7.5MM OZ a year at current market prices) ,considering that World Gold Production is about 50 million oz a year, this is going to make a serious dent.

    Second, this is Debka, so not so reliable.

    PS: I wounder if India has WMDs (other than their nukes) and how long it will take AlQuaeida to set up shop there? /sarc off

    • I stand corrected. According to Wikipedia, India has 17 million oz of gold (557 Tonnes). At current market prices and a 2 gram per barrel exchange rate they can buy 272 million barrels of oil before running out of gold, or about 3 years at current quantities (12% of consumption)

  • Paul Prichard

    India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees
    Tyler Durden’s picture
    Submitted by Tyler Durden on 01/21/2012 00:07 -0500
    But trading gold for crude oil is way, way, way bigger news than trading rupees for crude oil.

  • Irving14941

    Read James G. Rickards’ book: Currency Wars

    It’s all there ….

  • intothevoid

    there were quite a few people who called for future currency/trade wars. it will be somewhat entertaining to watch this ‘day time drama’ unfold… panties will get bunched over this, so have your popcorn ready.

  • Rainmaker

    Sorry to have to throw Debka into the mix, but I thought appropriate to disclose “the leak” because this will be all over the MSM by tommorrow. (and, I accept most forms of propaganda)

    The original threat was the Yen (too much like the Dollar?) and then the Rupee (too much like the Ruble?). Certainly not USDs or Euros, the west is holding them hostage. Not the CHF the Swiss are in duckstep with the EU. Not RMB, there is too much velocity. Not real gold, too many logisitics issues with the too and fro. But computer generated chits denominated in Gold, that was a brilliant idea. Almost too brilliant. More like directed history. Anything but USDs or Euros.

    I bet the IMF is printing SDRs as we speak. I wonder what the topic of conversation in Davos is going to be this week.

  • rick

    Interesting situation. Let’s review…we invaded Iraq because they were attempting to set up an oil bourse and would use Euros as the official currency. Then, we invade Libya because Ghaddafi wanted to set up an oil bourse and use a gold dinar as the official currency. Will this result in war with India?

    • rainmaker

      The Iranians were attempting to set up an oil bourse on the ilse of Kish. Still are I think. Saddam was intent on using the Euro as his exchange. Ghaddafi had proposed a gold dinar. Don’t expect any confrontation with India, they are one of the wests “allies”. They also have 1 BB people and “the bomb” and offset Pakistan. And they have limited natural resources (no oil) No, no war there. At least not on the short horizon. Expect the Iranians to close the Straits of Hormuz. Or the Palestians or some fringe group from Gaza or the West Bank to horrifically attack Isreal. Or Al-Assad to have terrible problems in Syria. Any one of those three, and Barry will let Bibi off the chain. (and you and I won’t know what really happened in any of those situations) The next front is Iran. After that, look to South America or maybe the Korean Peninsula.

      Ever get the feeling that you/we are the odd man out in a game of musical chairs?

    • rainmaker

      And if you really want to get confused, check out this article by Chris Cook (one of the original proposers of the Iranian oil bourse)on the Oil Drum:

  • Silver Shield

    The Anti Hegemon is rising…

    Keep stacking it is going to get nasty.

    • rainmaker

      Yup, Drudge tied it to a Forex website to give it more credibility, however, the Forex article referrenced “a new and yet unconfirmed report”, which is the Debka article. We know who publishes that information. Whats interesting is there has been talk about using the Yen and then the Rupee. The Russians and Iranians recently agreed to trade in their respective currencies, not USDs. Mid last year, the Chinese and Russians agreed to trade in their respective currencies, not USDs. The Chinese recently agreed to build a refinery for the Saudis in Saudi Arabia. No one knows for certain what currency that will be, hoever, the Saudis can pay in oil until a further later date when the means of trade can be determined. Two banks are reportedly involved in this deal: India’s state owned UCO Bank and Turkey’s state owned Halkbank. Last time I checked, India was still one of the strategic partners with the West (US) and Turkey was still a member of NATO. Geitner actually went to China to ask them to participate in the sanctions and instead, they declined and sent a delegation to Tehran to firm up a better trade deal with the Iranians. China already has 20+/- contracts with the Iraqis that were somehow awarded them instead of Exxon. The Iranians closed the Straits of Hormuz a few weeks ago without firing a missile. The Stennis left the area without challenging the Iranians, however, the Abraham Lincoln transited the Straits today. The Turks would like to invade the other half of Cypress.

      The dollar will be a safe haven for several more months, long enought o keep the sheeple busy while the pieces of the “Risk” board are aligned. Watch the west do nothing while is opponents openly challenge it. Also look for anything that has strategic value, especially from a commodities perspective, be part of the challenges sent by opponents. More than anything, watch the middle east. Its time to pick teams.

  • Archangel

    Iran bypassing the petrodollar (or wanting to) is not new. The Iranian Oil Bourse has been open since 2008 according to several web sources, though I saw an article that said it just opened in July 2011. Regardless, the first transaction was in August 2011. Let the war drums beat. I’m reading “Crossing the Rubicon”, published in 2004. I just read the part about what it takes 6 weeks to get middle east crude to the usable product in the US, 2 weeks from west africa (umm, can you say Libya?) and 2 days from Venezuala. This is all making too much sense. It really IS about oil. Dang, how cliche. Anyway, won’t be long, war with Iran would unleash hell from Russian and China. Get your shit together. This will be some good theater.

  • James Scott

    Is Spielberg writing this script??

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