Sanctions dodge: India to pay gold for Iran oil, China may follow

[Exarch]

India has reportedly agreed to pay Tehran in gold for the oil it buys, in a move aimed at protecting Delhi from US-sanctions targeting countries who trade with Iran. China, another buyer of Iranian oil, may follow Delhi’s lead.
The report, by the Israeli-based news website DEBKAfile, states that Iran and India are negotiating backup alternatives with China and Russia, should the US and EU find a way to block the gold payment mechanism.
Delhi’s move is seen as surprising, as earlier India and Iran said they would switch to yen and rupees. China, another major importer of Iranian oil, may follow Delhi’s lead, the report adds.
India and China need to switch from the dollar in bilateral trade, since the US and EU have issued unilateral sanctions against the Iranian oil industry and financial institutions. The sanctions would ban any bank involved in oil trade with Iran from dealing with American and European counterparts.
Both India and China, two major buyers of Iranian oil accounting for 22 and 13 percent of its total export respectively, have refused to join such sanctions. This means they have to establish a reliable way of paying for crude, independently of the parts of the global financial system controlled by New York and London.
Delhi’s current plan is to effect payments through two state-owned banks, India’s UCO Bank and Turkey’s Halk Bankasi, Turkey being another country refusing to join the sanction spree.
The US issued sanctions against Iran in December, aiming to put pressure on the Islamic Republic and make its controversial nuclear program more transparent. The EU joined the initiative on Monday, banning new oil contracts with Iran, but allowing current ones to be fulfilled.
Australia on Tuesday became the latest country to voice plans for such an embargo, although the move would be more symbolic than practical, considering the country’s small share in Iran’s oil export.
Japan and South Korea, two other major buyers of Iranian crude, are in talks with Washington over the issue, although both Seoul and Tokyo are worried that stopping their imports could hurt their economies.
Iran, which is highly dependent on its sales of oil, is reacting to the sanction campaign nervously. Tehran says it will not yield to pressure, and threatens to block the Strait of Hormuz, a key oil tanker route in the Persian Gulf.
German political analyst Christoph R. Horstel told RT that amid the economic crisis the embargo on Iranian oil imports could backfire on the EU, while Iran “will do quite well even under the embargo.”
“All the present faithful customers to Iran oil are set to continue buying this oil, and they will find a way, rest assured,” he said. “This is the signal I get from Tehran.”
“I was personally present when the deputy economics minister of Iran was talking to a foreign society in Berlin,” he added. “And the gentleman said very openly to the shocked audience ‘OK. You don’t want to buy our goods. Well, the Chinese do.”

Source: http://rt.com/news/iran-india-gold-oil-543/

it's no secret that Asia is heavily dependant on Iranian oil; even the south koreans and japanese are heavily dependant on Iranian oil. It's clear that these sanctions are politicking in the leadup to election season, and nothing'll come off it. Meaning no war, sorry war addicts. no more March of 2003, staying up to watch bombs going off.

[Veliky Kaiser Theos]

Beats one of the worlds most important economies having oil shortages.

[hellheaven1987]

Meaning no war

NOOOOOOO!!!

My lord is not pleased about this outcome... Now may be I should hope Chinese would prefer to seize the oil fields for themselves.

[Dr Zoidberg]

Not that I condone India or China's actions, it's not surprising given their need for Iranian oil. 22% and 17% respectively is a sizeable chunk of a nation's oil needs. What would be a smart move on the US and EU's part would be to assist these nations in finding and securing alternative oil supplies so that they can meet the sanctions.

[bushbush]

Not that I condone India or China's actions, it's not surprising given their need for Iranian oil. 22% and 17% respectively is a sizeable chunk of a nation's oil needs. What would be a smart move on the US and EU's part would be to assist these nations in finding and securing alternative oil supplies so that they can meet the sanctions.

Americans' calculation seems to be that China and India will know squeeze Iran's balls by asking for heavy discounts, since they are now the biggest customers. This will end up hurt Iran anyways, quite substantially, together with EU, Japan, and Korea already agreeing to either stop buying or reduce importing oil from Iran.

[alhoon]

Not that I condone India or China's actions, it's not surprising given their need for Iranian oil. 22% and 17% respectively is a sizeable chunk of a nation's oil needs. What would be a smart move on the US and EU's part would be to assist these nations in finding and securing alternative oil supplies so that they can meet the sanctions.

Oil fields and exploit doesn't happen in a day or a year. It's not easy to find enough oil to make the lack of Persian oil insignificant.
Also the EU includes us (Greece), Spain, Ireland and Italy. Persia is the only serious oil producer that sells oil accepting credit and payments after 5 months from us.
That means the EU is also stressed to secure oil supplies. Whatever the USA think, we all need Persian oil. What will be the outcome? I don't know, but I think this embargo will fall short, because so far, Iran has us by the genitals.

Americans' calculation seems to be that China and India will know squeeze Iran's balls by asking for heavy discounts, since they are now the biggest customers. This will end up hurt Iran anyways, quite substantially, together with EU, Japan, and Korea already agreeing to either stop buying or reduce importing oil from Iran.

That means that oil prices will go down. I don't think this will happen. So... I doupt they will get heavy discounts = hurting Iran badly. As I said, some of us can't afford to be picky and EU isn't actually at its best.

[bushbush]

That means that oil prices will go down. I don't think this will happen. So... I doupt they will get heavy discounts = hurting Iran badly. As I said, some of us can't afford to be picky and EU isn't actually at its best.

For China and India, the price will certainly go down. Iran will have no other buyer (except maybe black markets). It will be insane for China and India not to get discounts.

[Veliky Kaiser Theos]

For China and India, the price will certainly go down. Iran will have no other buyer (except maybe black markets). It will be insane for China and India not to get discounts.

Not necessarily. Both the supplier and the consumer need each other equally. It's not like India and China can go and find that much oil elsewhere.

[bushbush]

Not necessarily. Both the supplier and the consumer need each other equally.

Not in this case, because there will be few buyers and one desperate seller, whose survival might depend on the oil revenue (50% of the Iranian government's income).

http://www.businessweek.com/news/201...z-patrols.html

Reducing Purchases

Dubowitz estimates that if China were the only remaining buyer of Iranian crude, it might command as much as 40 percent discounts. Among the other major refiners of Iranian oil, India has increased orders from Saudi Arabia, and Japanese and South Korean officials say they are gradually reducing their dependence on Iran, Dubowitz said.

The European Union, which is collectively the No. 2 buyer of Iranian crude, taking 18 percent of Iran’s exports, has agreed in principle to an embargo of Iranian oil. The 27 EU foreign ministers are expected to approve the embargo at a Jan. 23 meeting in Brussels.

Discussion of the EU embargo “is already setting off a cascade of oil-market behavior,” as the Chinese try to exploit Iran’s weakness by demanding price cuts, Dubowitz said.

Forcing Discounts

The Chinese “are forcing the Iranians to offer these price discounts to compensate for added political and legal risk,” said Dubowitz, who has been advising Congress and the Obama administration.

Sanctions work in part by leveraging the greed of buyers willing to flout sanctions, he said. Even those buyers will hurt Iran’s bottom line by cutting their oil revenue, Dubowitz said.

Dubowitz agrees with Lam that there’s little evidence that “Beijing and Tehran are breaking up.” Rather, a shrinking circle of refiners will be able to “ruthlessly drive for discounts,” he said.

This actually will help the Americans to an extent, further reducing Iran's oil revenue, putting pressure on the regime to abandon its nuclear ambition.

[Condottiere 40K]

The Iranians could then launder the gold, which may end up back with the Indians and Chinese, and the cycle will continue.

[Vanoi]

Sanctions aren't completely dodged. The US is still trying to convince other Asian countries besides India and China yp embargo Iranian oil.

[Rolling Thunder]

Bomb the refineries?

[Thorn777]

Another reason to free Iran. The Iranian oil and the gold should also be used to fund our efforts, unlike what happened in Iraq, while it was promised.

@Bushbush

Certainly sucks to get paid in gold instead of inflated dollars. What a bummer for Iran.

[bushbush]

@Bushbush

Certainly sucks to get paid in gold instead of inflated dollars. What a bummer for Iran.

Gold doesn't really mean much for Iran at this point. It is not like they can sell gold on the international market.

[Thorn777]

Iran knows why the US is bugging suddenly. Its economic.

And gold can always be sold...

[bushbush]

And gold can always be sold...

Not legitimately on the international market for Iran. Who are they going to sell to now? The buyers in the West can't do business with Iranian banks. They can sell the gold back to China and India? The problem is that banks in those countries don't want to face sanctions by the Americans too.

I guess they can try sell gold in the black market. But the trading volume there is small and price is discounted too.

They might as well ask for cocaine back for their oil, it is easier to trade those.

[alhoon]

Not legitimately on the international market for Iran. Who are they going to sell to now? The buyers in the West can't do business with Iranian banks. They can sell the gold back to China and India? The problem is that banks in those countries don't want to face sanctions by the Americans too.

I guess they can try sell gold in the black market. But the trading volume there is small and price is discounted too.

They might as well ask for cocaine back for their oil, it is easier to trade those.

Gold in the black market is not discounted. And there are plenty of business that would gladly accept gold these days over Euro or $. Have you seen how much gold rises these days?

In any event, Iran can stockpile the gold and wait for each hicup. These days there's one every 3-4 months.
Fear Greece may default? "OMG!!!111 buy gold!" Fear the Americans will not reach a consensus next time on the budget and American banks may suffer? "OMG!!!111 buy gold!" Fears Italy will go to the rescue package? Fears that the Eurozone will collapse?
In each of these cases private companies, banks, investors etc will heavily invest in Gold.

In our university many of our professors used to say 10 years ago that taking a natural resource like oil and give money (i.e. paper that has the value we assign to it) is a bad deal, and that giving the Middle east Gold instead would be better for them.

Europe ie. the E.U. Is under the control of economic fools. Who let ideology govern its moves.

It will continue its economic decline as it forces higher and higher energy costs onto its citizens and industries.

That.
USA doesn't need Iranial oil. China, India and poor countries in EU with bad credit rating desperatedly need it. Our imports (Greece) from Iran should increase since they accept to sell us oil with the payment to come in 5 months. Few others do.
By the time Libya is back on track it will be too late.

Turkey, Syria, Lebanon, Pakistan, Burma and a few others have said they will continue to buy Iranian fuel.

So, we could buy Iranian oil from Turkey? Or they're not allowed to sell it, even if they have already bought it?
And which Syria? Assad's Syria or the other one?

[bushbush]

Gold in the black market is not discounted. And there are plenty of business that would gladly accept gold these days over Euro or $. Have you seen how much gold rises these days?

In any event, Iran can stockpile the gold and wait for each hicup. These days there's one every 3-4 months.
Fear Greece may default? "OMG!!!111 buy gold!" Fear the Americans will not reach a consensus next time on the budget and American banks may suffer? "OMG!!!111 buy gold!" Fears Italy will go to the rescue package? Fears that the Eurozone will collapse?
In each of these cases private companies, banks, investors etc will heavily invest in Gold.

That's really ridiculous. The market for gold is HOT, but in the legitimate market. There are a lot of procedures you have to go through, especially in large quantity, to show the source and other information for the gold you sell under the law.

Iranians can't move billions dollar worth of gold that way in the open market, where most buyers are. The investors who dare to buy gold, especially illegitimately, from Iran, will get noticed very easily consider how tightly monitored the gold market is.

It is really insane if you think Iran can move billions dollars worth of gold to legitimate buyers.

[alhoon]

Iranians can't move billions dollar worth of gold that way in the open market, where most buyers are. The investors who dare to buy gold, especially illegitimately, from Iran, will get noticed very easily consider how tightly monitored the gold market is.

It is really insane if you think Iran can move billions dollars worth of gold to legitimate buyers.

Well, one thing:
Iran can legaly sell gold you know. The sanctions aren't against trading with Iran, hence it can sell oil. Unless there's a sanction against gold, Iranian banks can sell gold to other banks. I don't think Panama for example has imposed embargo on Persian gold, so all those businesses and banks there can take the gold and pay in cash. And then pay other banks in USA with gold.

[DarthLazy]

+rep India .