It appears that gold isn't really a currency... until it is. The Economic Times reports that India is attempting to ensure steady crude oil supplies from Iran. In doing so it is doing everything it can to pay Iran in a way that avoid loopholes associated with recent US sanctions. And the stunner: "India could settle crude oil import transaction using gold in the short term, while efforts to resolve the deadlock continue." But does Iran realize they can't possibly eat all that gold? Or that The Fed has no way of diluting to oblivion? Or that, unlike the dollar, it is currently not involved in a global race to bottom in which every central bank will have no choice but to print ever more of its linen-infused currencies? Something tells us that the answer to all three is yes.
From Economic Times:
India is determined to ensure steady crude oil supplies from Iran and is even considering settling payments with gold in the short term before the two countries agree on a mutually accepted currency and a bank to clear the transactions.
"We have written a letter to NIOC ( National Iranian Oil Company )) asking it to suggest a bank where US sanctions are not applicable," a government official involved in the matter said requesting anonymity.
Another official said India could settle crude oil import transaction using gold in the short term, while efforts to resolve the deadlock continue. An Indian delegation, including officials from ministries of external affairs, finance and petroleum, will visit Tehran next week to thrash out the payment issue, officials said.
Oil industry officials are keenly awaiting a solution as India imports 80% of the 184 million tonne of crude oil it refines every year, and Iran accounts for 16% of these purchases, making it the second-biggest supplier, after Saudi Arabia.
India's crude oil imports from Iran faced an impasse after the Reserve Bank of India declared that a regional clearinghouse that involved the Iranian central bank could no longer be used to settle oil and gas transactions between the two countries.
It appears that it was the United States which itself precipitated this decision to seek potential alternative "currencies"
Several analysts believe India had acted under the pressure of the United States, which has lauded the RBI's action. Last year, India had protested Iran's remarks on Kashmir, and earlier, India had voted against the country's nuclear programme in a resolution of the International Atomic Energy Agency.
Domestic oil companies faced the crisis after the Reserve Bank of India (RBI) discontinued a settlement through the Asian Clearing Union (ACU) for crude oil payments to Iran. ACU, an initiative of the United Nations Economic and Social Commission for Asia and Pacific (ESCAP), was established in 1974 at Tehran for promoting regional co-operation. It facilitates payments among member countries for eligible transactions on a multilateral basis. The model helps in economising the use of foreign exchange reserves and transfer costs.
Ironically it is the US' desire to maintain political hegemony that may just be the catalyst that forces other countires to realize that transacting in a currency which is less and less deserving of a reserve moniker, is greatly overvalued.
h/t Mike Krieger