Oil shortage looms as RBI joins Iran embargo
30 December 2010
India may face fuel supply shortages next month after the Reserve Bank of India (RBI) stopped facilitating payments for Iranian crude imports, which make up for 12 per cent of the nation's oil needs.
The RBI said on Monday that deals with Iran must be settled outside the Asian Clearing Union (ACU) system, used by central banks of member nations to settle bilateral trades.
The RBI's move, which reportedly came without either the oil industry or the government being consulted, would mean that the nation cannot import 10 million barrels of crude oil contracted from Iran for January, a replacement of which cannot be found easily.
However, the western media, like The Wall Street Journal, see the development as a sign that India has quietly joined the US-led embargo on Iranian oil.
India is Iran's biggest trading partner in business done through the ACU, originally set up by the United Nations in 1974 to help facilitate trade in South Asia and headquartered in Tehran.
The same mechanism that has allowed the body to fill its original purpose of simplifying international trade by letting central banks handle payments on behalf of their nations' companies, can also obscure which firms are doing business on both ends of a deal.