Reuters has reported that India and Iran have decided to drop the dollar in some of their oil trade between the two countries.

 India and Iranhave agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions.

India, the world’s fourth-largest oil consumer, relies on Iran for about 12 percent of its imports or 350,000-400,000 barrels per day (bpd) and is Tehran’s second-biggest oil client after China.

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An Indian delegation has been in Tehran this week discussing options for payment and the source said the decision to pay in rupees was made after a meeting there.

“The Central Bank of Iran will open an account with an Indian bank for receiving payment and settling its import,” the source, who has direct knowledge of the matter, said, adding the new system will start “soon”.

The source did not specify the name of the Indian bank. But other sources have said that Iran could open an account with India’s UCO Bank as it does not have any interests in the United States.

In addition to rupee payments, Indian refiners will continue to make payments through the current mechanism using Halkbank, this source said, “as long as it continues”.

How about this for a kick in the stones for Obama’s administration 😉

India Trade Secretary Rahul Khullar said this week that the Indian delegation to Iran would work around the U.S. sanctions to protect oil supplies and promote Indian exports.

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Asian support for U.S. sanctions is vital since the region buys more than half of Iran’s daily crude exports

This follows a list of large Asian and Middle East countries that have abandoned the dollar in trade between themselves. In a previous post we wrote about Iran and Russia dropping the dollar.

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