As it looks for similar deals with other suppliers, India, the third-largest energy consumer in the world, is pushing for the adoption of the local currency internationally. Officials noted that internationalisation is a process without any specific goals, and that India made its first-ever payment for crude oil purchased from the UAE in rupees. With the country relying on imports for more than 85% of its oil needs, India has pursued a three-pronged strategy of purchasing from the cheapest available source, diversifying sources of supply, and not violating any international obligations, such as the price cap in the case of Russian oil.
Although the approach saved billions of dollars, it is now trying to settle trade in rupees rather than dollars in an effort to reduce transaction costs by doing away with currency conversions. This is because it increased purchases of Russian oil, which some in the West boycotted after the war in Ukraine. The Indian Oil Corporation (IOC) paid Abu Dhabi National Oil Company (ADNOC) in Indian rupees for a million barrels of crude oil after India and the UAE inked an agreement in July about rupee settlement.
Russian oil shipments are paid in rupees
There are also certain Russian oil shipments that are paid for in rupees. According to officials, the US dollar has been the standard payment currency for crude oil imports for a number of decades. This is because the dollar has historically had lower hedging costs and is more liquid.
However, since last year, the Reserve Bank of India has permitted more than a dozen banks to settle trades in rupees with 18 nations, thereby enhancing the rupee’s prominence in cross-border payments. Since then, authorities claimed, India has been pressuring major oil exporting nations like Saudi Arabia and the United Arab Emirates to accept Indian rupees for trade settlements. The first such transaction was completed in August of this year when IOC paid ADNOC in rupees.
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