India buys Iran Oil for Gold – Making Enemies at what cost?

Last updated on Jan 25, 2012

Posted on Jan 25, 2012

Gold Bar

India and China need Petroleum.  Lots of it.  Now, that US and the Western countries are going against Iran and imposing sanctions, India is all set to create a new front.  And some amazing enemies.

Israel will not be happy.  Neither US.  Nor the other Western countries.

All that would be fine, if India were to work in its own national interest.  But it seems we are doing something dangerous.

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.

While China and Russia have used a different set of currencies – other than the US Dollar, India is giving out its Gold.  At a time when the forex reserves in India are precariously balanced and things could go downhill, if the US/Europe based investment bankers take their money away – giving out Gold for the transactions is downright stupid.

That may be one reason why the world was kept in dark about the transaction being in Gold!

Another reason is that with payment being made in Gold – LOTS of it because India’s oil needs are huge – the price of Gold will shoot up.  That will put a downward pressure on the US Dollar.  Something that will hit at US interests.

At a time when India is trying to handle the “Encirclement policy” by China and Pakistan, this will hurt badly in medium and long term.

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