This remarkable achievement is poised to further fortify the economic relationship between the two nations.
In a historical move, the collaboration between India and the UAE has led to a groundbreaking milestone: settling crude oil transactions in their respective national currencies. This remarkable achievement is poised to further fortify the economic relationship between the two nations.
It involved the Abu Dhabi National Oil Company (ADNOC) and the Indian Oil Corporation Limited (IOCL), marking the debut of the Local Currency Settlement (LCS) system. This mechanism enables transactions to take place using both Indian Rupees (INR) and UAE Dirhams (AED) for settlement. The Indian mission in the UAE highlighted that the LCS system’s potential impact extends beyond bilateral economics, resonating across global economic interactions.
Prime Minister Narendra Modi’s recent visit to the UAE in July played a pivotal role in establishing the LCS mechanism through a Memorandum of Understanding (MoU). This agreement is anticipated to cut down on transaction time and costs significantly, while also encouraging the use of national currencies for cross-border trade.
Also Read: India-UAE Partnership: A crucial alliance for mutual prosperity and growth
One of the standout features of the LCS mechanism is its flexibility, allowing traders to select the payment currency through mutual consensus. Moreover, any surplus funds in local currencies can be invested in various local currency assets, such as government securities, corporate bonds, and equity markets. This ingenious approach is poised to revolutionize economic interactions not only between India and the UAE but on a broader global scale.
This oil transaction isn’t the first of its kind under the LCS; a prior transaction involving gold took place. The initial transaction involved the sale of 25 kg of gold from a renowned UAE gold exporter to an Indian buyer, totaling approximately Rs 12.84 crore. This successful gold transaction served as a testament to the effectiveness and feasibility of the LCS mechanism.
Petroleum and its products constitute a substantial portion of the bilateral trade between India and the UAE. In the previous year alone, the trade in petroleum products amounted to an impressive US$ 35.10 billion, accounting for a staggering 41.4 percent of the overall bilateral trade volume. The UAE’s significant role as India’s fourth-largest source of crude oil, and second-largest source of LNG and LPG, underscores the importance of this economic partnership.
https://www.financialexpress.com/business/defence-india-and-uae-forge-historic-path-with-crude-oil-settlement-in-national-currencies-3211199/
