US Oil Sanctions Against Iran Help Revive Indian Currency Value

Reports indicate that with the onset of US oil sanctions and payments for Iranian oil in rupees, the value of India's national currency is significantly increasing. The 'Hindustan Times' reports that due to payments in rupees instead of foreign currencies for Iranian oil purchases, the value of the rupee increased by about one rupee against the dollar on Friday, with each US dollar trading at 74 rupees and 45 paise (each paise is one-hundredth of a rupee). This level of increase in the rupee's value in a single day is unprecedented in the past five years. This year alone, the rupee had lost 17% of its value against the dollar, and payments in rupees instead of dollars could help revive its value. Indian sources reported two months ago that starting in November, all payments for Iranian oil would be deposited into an account in India in rupees. The US implemented oil sanctions against Iran on November 4, and it was decided that oil customers would deposit payments into an account in the buyer's country, with these funds only to be used for 'purchasing humanitarian items.' India is the second-largest buyer of Iranian oil after China, having imported 554,000 barrels of oil from Iran daily in the first half of this year, according to the US Energy Information Administration. Reports indicate that the US has granted exemptions from sanctions to eight of Iran's customers, but these countries must significantly reduce their oil purchases from Iran. Recently, two energy consulting firms, 'Kepler' and 'Goldman Sachs,' predicted that India's oil purchases from Iran would decrease to 350,000 barrels. The value of this amount of oil, at current prices, is about $9.5 billion. During the previous sanctions (2012 to 2015), India paid 45% of the price of Iranian oil in rupees and 55% in euros, but all these funds were blocked in an account in India, and Iran could only use these resources for importing 'permitted' goods from India. Now, India pays all of Iran's oil money in rupees. China, the largest buyer of Iranian oil, which imported 644,000 barrels of oil from Iran daily in the first half of this year, reportedly paid for Iranian oil with its national currency even after the sanctions were lifted in 2016. China is also Iran's largest trading partner for non-oil goods, and according to official statistics, last year Iran exported over $9 billion worth of non-oil goods (including gas condensates, which are a type of crude oil) to China and imported over $13 billion worth of goods from China. Thus, the non-oil trade balance is significantly in favor of China and could be compensated with Iran's oil money. More than a quarter of Iran's total non-oil foreign trade is with China. More than a quarter of Iran's oil exports also go to China. This is not the case for India. Iran's non-oil exports to India are even greater than Iran's total imports from India. More precisely, according to official Iranian statistics, last year the non-oil trade balance between Iran and India was over $500 million in favor of the Islamic Republic, and it is unclear how Iran's blocked funds in India will benefit the Islamic Republic. During the previous sanctions, India had the largest debt among oil-importing countries to Iran, which was paid in several installments.