India Joins Asian Dollar Exclusion Zone, Will Transact With Iran In Rupees

Tyler Durden's picture


Two weeks ago we wrote a post that should have made it all too clear that while the US and Europe continue to pretend that all is well, and they are, somehow, solvent, Asia has been smelling the coffee. To wit: "For anyone wondering how the abandonment of the dollar reserve status would look like we have a Hollow Men reference: not with a bang, but a whimper... Or in this case a whole series of bilateral agreements that quietly seeks to remove the US currency as an intermediate. Such as these: "World's Second (China) And Third Largest (Japan) Economies To Bypass Dollar, Engage In Direct Currency Trade", "China, Russia Drop Dollar In Bilateral Trade", "China And Iran To Bypass Dollar, Plan Oil Barter System", "India and Japan sign new $15bn currency swap agreement", and now this: "Iran, Russia Replace Dollar With Rial, Ruble in Trade, Fars Says."" Today we add the latest country to join the Asian dollar exclusion zone: "India and Iran have agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions." To summarize: Japan, China, Russia, India and Iran: the countries which together account for the bulk of the world's productivity and combined are among the biggest explorers and producers of energy. And now they all have partial bilateral arrangements, and all of which will very likely expand their bilateral arrangements to multilateral, courtesy of Obama's foreign relations stance which by pushing the countries into a corner has forced them to find alternative, USD-exclusive, arrangements. But yes, aside from all of the above, the dollar still is the reserve currency... if only in which to make calculations of how many imaginary money one pays in exchange for imaginary 'developed world' collateral.

On India's induction into the dollar unluck club, from Reuters.

An Indian delegation has been in Tehran this week discussing options for payment and the source said the decision to pay in rupees was made after a meeting there.


"The Central Bank of Iran will open an account with an Indian bank for receiving payment and settling its import," the source, who has direct knowledge of the matter, said, adding the new system will start "soon".


The source did not specify the name of the Indian bank. But other sources have said that Iran could open an account with India's UCO Bank as it does not have any interests in the United States.

Who's this India country anyway?

India, the world's fourth-largest oil consumer, relies on Iran for about 12 percent of its imports or 350,000-400,000 barrels per day (bpd) and is Tehran's second-biggest oil client after China. But Washington has snapped tighter financial sanctions on Iran and wants Asia, Tehran's biggest oil market, to cut imports in a bid to pressure the Islamic nation to rein in its nuclear ambitions, which it suspects are aimed at making weapons.

And, oh yes, we forgot Turkey -the (lately very pissed off) gateway to Europe.

Turkey and Iran said on Thursday they want to increase financial transfers and that work is underway to strengthen banking ties.

When the dollar fails, and currency are devalued, barter begins:

India Trade Secretary Rahul Khullar said this week that the Indian delegation to Iran would work around the U.S. sanctions to protect oil supplies and promote Indian exports.


The government source said Iran has agreed to step up imports from India which added up to some $2.7 billion in 2010/11 and including oilmeal, rice and tea.


"This will cushion them (Iran) to some extent from exchange rate volatility," the source said.

Ironically, and as has been stated here many times before, by enacting the proposed sanctions and embargo, the US, but mostly Europe is doing nothing but shooting itself in the foot, as it opens up a brand new pathway of not only outright defiance, and thus political brownie points domestically for the likes of China, of the US, but it will allow the "Asian dollar exclusion zone" to buy even more crude, at cheaper prices, while in the process it is forced to build closer monetary relations with its neighboring countries, relations that rely less and less on the world's increasingly less relevant reserve currency.

Asian support for U.S. sanctions is vital since the region buys more than half of Iran's daily crude exports. The European Union has agreed in principle to halting Iranian crude imports and could finalise the ban on Jan. 23.


China, Iran's biggest crude customer, has rejected the U.S. sanctions as overstepping the mark and defended its extensive imports from the second-biggest oil producer in OPEC.

Necessity may be the mother of all dollar-exclusive invention, but Obama is surely the father of necessity.

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Sat, 01/21/2012 - 01:39 | 2083487 Flakmeister
Flakmeister's picture

You'll know the answer then... ;-)

Sat, 01/21/2012 - 05:43 | 2083746 akak
akak's picture

The DXY is an artificial, spurious and meaningless measure of the value of the US Dollar, which it demonstrably and inherently does NOT measure at all.  Trying to use any sort of average of various depreciating fiat currencies to measure the "value" of a similarly depreciating fiat currency is the height of folly and stupidity.

Sat, 01/21/2012 - 05:50 | 2083751 cossack55
cossack55's picture

Agree. Been watching the BDI lately. Approaching historic lows.

Sat, 01/21/2012 - 09:31 | 2083896 Iam_Silverman
Iam_Silverman's picture

"the BDI lately. Approaching historic lows"

Because we need fewer bulk carriers to ship USD overseas nowadays?

Sat, 01/21/2012 - 10:21 | 2083949 cossack55
cossack55's picture

I thought we airmailed via C-5A

Sat, 01/21/2012 - 11:02 | 2084005 TwelfthVulture
TwelfthVulture's picture

"Because we need fewer bulk carriers to ship USD overseas nowadays?"


I reallly hope you're being humorous.  Because it measures the movement of finished (or near finished) final product AND raw bulk materials, it's signalling a serious downturn in global production at the moment.

Sat, 01/21/2012 - 19:43 | 2085218 Iam_Silverman
Iam_Silverman's picture

"I reallly hope you're being humorous."

Yes, I was being facetious.  We really don't ship our USD by large vessels.  All it takes is a click from Timmays mouse and we have just exported a ton of inflation, er.....currency.

Sat, 01/21/2012 - 10:59 | 2083999 TwelfthVulture
TwelfthVulture's picture

That shit is amazing!  I've never seen it do quite that before.  As a predictor, it usually does quite well.  Taken in conjunction with the ECRI, I am looking for short opportunities.

Sat, 01/21/2012 - 06:48 | 2083776 Snidley Whipsnae
Snidley Whipsnae's picture

akak... 100% correct. Measuring the dollar agains what?... another pile of fiat bull shit?

Measuring the US Dollar will be very accurate when the paper traders blow themselves up... which they are well along the way to accomplishing.

At that point the dollar will be measured against all commodities. We will find out how many dollars/euros/yen/rupi/yuan/etc the oil producers want for a bbl of crude, a bushel of wheat, a ton of copper, an oz of PMs, etc.

The only true measure of fiat is against a real commodity. If countries no longer buy into 'full faith and credit' of a soverign, then the fiat of that soverign is dead as a doornail... excepting usage within the soverign between workers and their grocers and gas stations.

As happened in Zimbabwe, Weimar Germany and many others, at some point no amount of fiat will purchase anything that the consumer needs for daily life.

Insert the above into your DXY calculation.

Sat, 01/21/2012 - 16:44 | 2084855 francis_sawyer
francis_sawyer's picture

outstandingly concise!

Sat, 01/21/2012 - 17:28 | 2084968 Cathartes Aura
Cathartes Aura's picture

right you are, both akak & Snidley - we're about to see how "value-able" the fairy tale of fiat is vs. real, tangible products that have use. . .

like most things that only have meaning in ones mind, fiat currencies are subject to the alarm call, and many are waking up, though perhaps fewer amrkns, having lived the story of supremacy their whole lives. . .

Sat, 01/21/2012 - 16:22 | 2084789 falun bong
falun bong's picture

increasing "stability", declining VIX etc seem to hurt the I guess we can expect more manufactured disaster and war

Sat, 01/21/2012 - 01:27 | 2083451 847328_3527
847328_3527's picture

Death by a Thousand cuts....painful.

So what is the dollars future?


Sat, 01/21/2012 - 01:39 | 2083485 ForTheWorld
ForTheWorld's picture

Just as with everything else in the known universe: cessation.

Sat, 01/21/2012 - 06:55 | 2083778 Snidley Whipsnae
Snidley Whipsnae's picture

Same as the future of all fiats as pointed out by Voltaire... ZERO

Here is his exact quote...

“At the end fiat money returns to its inner value—zero.”

- Voltaire

Or, if you need further confirmation...

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation […] Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

- Alan Greenspan, Gold and Economic Freedom (1968)

Sat, 01/21/2012 - 08:28 | 2083850 mendigo
mendigo's picture

I am thinking that it is not very important what form of currency is usef to trade "some portion" of the 12bn in trade conducted between India and Iran. Is this a joke? It certainly got the fringe arousef.

Sun, 01/22/2012 - 00:27 | 2085797 Seer
Seer's picture

Google (or whatever search engine) "pretrodollars."  This is not small stuff, this is the essense of US power: in this case it's a firm rebuke of the USD; the USD is losing value, rapidly.

Sat, 01/21/2012 - 09:35 | 2083901 Iam_Silverman
Iam_Silverman's picture

"So what is the dollars future?"

Good Question!  How does that saying go?....... On a long enough timeline........................

Sat, 01/21/2012 - 01:36 | 2083474 lolmao500
lolmao500's picture

Jewish American newspaper : Mossad should assassinate Obama so the US can attack Iran

Nice people you got there.

Sat, 01/21/2012 - 02:02 | 2083532 CompassionateFascist
CompassionateFascist's picture

No big deal. They did the Liberty. And got away with it. Just serving notice of what they can, and will do if he's disobedient.

Sat, 01/21/2012 - 02:08 | 2083544 xcehn
xcehn's picture

The US should be outraged at this call for violent regime change.

Sat, 01/21/2012 - 04:35 | 2083701 francis_sawyer
francis_sawyer's picture

The US only gets violent when they run out of free chicken at Popeyes...

Sat, 01/21/2012 - 06:58 | 2083780 Snidley Whipsnae
Snidley Whipsnae's picture

How many MSM outlets will this story appear on?

Will ZH run this story?

How many financial sites will run this story?

Sat, 01/21/2012 - 12:22 | 2084109 Schmuck Raker
Schmuck Raker's picture

What story? That some ass-wipe IN ATLANTA suggested that killing HIS(US) President might be to the benefit of a foreign power?

Big deal.

Sat, 01/21/2012 - 11:02 | 2084003 Hey Assholes
Hey Assholes's picture

But it is OK for us to wack leaders in other countries.

Hypocrite ass.


Sat, 01/21/2012 - 12:08 | 2084078 xcehn
xcehn's picture

oh's the /sarc switch just for you, genius.

Sat, 01/21/2012 - 09:14 | 2083882 my puppy for prez
my puppy for prez's picture

The zionist bankers have no fealty to anything but their own empire.

Puppets are disposable for their ultimate purpose.

Sat, 01/21/2012 - 16:46 | 2084861 ozziindaus
ozziindaus's picture

Very true. The King David bombing was a clear signal to the English that the Zionists no longer seek their protection. Cue the US as global super power and protector of Israel. 911 was the clear signal to the US...but who will Israel seek as their new savior???? My guess, starts with C and rhymes with anberra.  

Sat, 01/21/2012 - 19:11 | 2085151 ucsbcanuck
ucsbcanuck's picture

Canberra? Australia? You're kidding right?

Sat, 01/21/2012 - 19:40 | 2085212 ozziindaus
ozziindaus's picture

no i'm not kidding and remember you heard it first here. don't be fooled by Australia's lack of military might, it won't matter. An enforced non-proliforation treaty will resolve that. Future wars will be fought electronically and through financial and social destruction without even sticks and stones needed. I think what Einstein meant to say is that WWIV will be fought with Apps.

Sun, 01/22/2012 - 00:35 | 2085810 Seer
Seer's picture

Not to demean Australians, I've got relatives there, but Australia only exists at its current height by the grace of coal and iron ore sales to China.  It's going to start collapsing as China's wild "growth" stalls and collapses.


Sat, 01/21/2012 - 22:10 | 2085530 Snidley Whipsnae
Snidley Whipsnae's picture

Ozz, you make me laugh. Before all is said and done Australia will probably be a member of the SCO.

Anyone in the SE Pacific that believes they can defy China ten years from now is not paying attention to what is happening.

For instance... One year ago who would have predictited that Japan and China would agree to trade in the respective currencies, avoiding the dollar?

One year ago who would have predicted that Canada would have chosen China over the US to sell their oil to, probably having more faith in the Yuan than the dollar?

One year ago who would have predicted that India would agree to purchase Iranian oil with Rupees and avoid US sanctions and dollars?

Things are happening fast and the pace is picking up.

Sat, 01/21/2012 - 22:58 | 2085644 ozziindaus
ozziindaus's picture

Yes and who would dare predict that in a few years the Zionist will abandon the US, after destroying it, and set up camp elsewhere? Why do I think Australia? Precession to the next anglo imperial colony far from the destruction they're about to leave behind. Warning to all Aussies from an Aussie living in the US. 

Sun, 01/22/2012 - 05:19 | 2086074 Snidley Whipsnae
Snidley Whipsnae's picture

Zionists will not move to Australia on mass... Not when Australia sees that the only viable future for them is to join the other powers in SE Asia. That means waving goodbye to the queen and joining the SCO and, really, considering their location on the globe, and their commodities trade with SE Asia,what choice will they have?

China already has a large population living in Australia and it's going to increase with time.

BTW, the Chinese are the only people on earth that grade out higher than Jews on IQ tests. Bell Curve, among many others, have proved this consistently.

Zionist Jews are too smart to try the bs they get away with in America with a large Chinese population in Australia that will soon be joining the ranks of the Australian government in numbers. The Zionists would soon be attending 'reeducation camps'. Anyone here believe the Chinese Australians would be dumb enough to turn over their money supply to Zionists?... Only in the dumbed down West have the Zionists captured the banks and then the pols and then placed the populations in debt servitude.

It never ceases to amaze me that Americans think the Chinese are not intelligent, are easily fooled, do not understand capitalism and all other forms of economic/political organization.... and would be subject to trickery by Zionists.

Sat, 01/21/2012 - 18:12 | 2085032 zerozulu
zerozulu's picture

For the last three thousand years, Jews and hindoos have never shown loyalty to any one but money.

Sat, 01/21/2012 - 19:15 | 2085158 ucsbcanuck
ucsbcanuck's picture

Wow - talk abt them ignorant stereotypes. Zero - do us all a favour and do some reading OK? 

Sat, 01/21/2012 - 01:39 | 2083481 Alpacanio
Alpacanio's picture

Not just the end of the Petrodollar. The US, at warp speed, is loseing any chance of cheap energy for the future as well... How's that Obama windpower woking out for ya?



Sat, 01/21/2012 - 09:38 | 2083904 Iam_Silverman
Iam_Silverman's picture

" How's that Obama windpower woking out for ya?"

Sadly, it is doing very poorly.  About as dismal as solar power and your use of a spellchecker.

Sat, 01/21/2012 - 11:51 | 2084048 Calmyourself
Calmyourself's picture

Yeah, spell check..  I found a mispelling in Walden Pond, must have been the typesetter so really a complete waste of my time, burned it, no use reading it after all.  Good point, thanks spell Nazi for protecting us all from missppelledd ideas..

Sat, 01/21/2012 - 16:32 | 2084821 falun bong
falun bong's picture

Calm yerself

Sat, 01/21/2012 - 01:38 | 2083483 lolmao500
lolmao500's picture

What Iran should ask for is refined oil. They don't have refineries in Iran... I bet you could set up oil refineries in China or India for a fraction of the cost.

Sat, 01/21/2012 - 02:47 | 2083606 DeadFred
DeadFred's picture

And it would be much less likely to have a conflict in space-time coordinates with a cuise missle or fifty.

Sat, 01/21/2012 - 07:00 | 2083782 Snidley Whipsnae
Snidley Whipsnae's picture

China already has the world's most advanced refineries. China has more refineries that can crack heavy/sour crude than any country on the planet.

Sat, 01/21/2012 - 07:35 | 2083808 falak pema
falak pema's picture

to think that those french refineries are now rotting like rusty ships in their yards, as is probably the case of American counterparts, all obsolete energy guzzling relics of past.

Sat, 01/21/2012 - 10:14 | 2083939 Bicycle Repairman
Bicycle Repairman's picture

No, no, no.  That oil is no good.  We can never figure out that oil.  Our current state of knowledge is the endpoint.  Peak oilers told me so.

Sat, 01/21/2012 - 14:24 | 2084406 steve.stuart
steve.stuart's picture

what u saying ... that is 10 years back. now iran has refineries and infact they export refined oil to other countries.

Sat, 01/21/2012 - 01:42 | 2083495 BlackholeDivestment
BlackholeDivestment's picture

...der is sumding berry fimiliar about dis.

Sat, 01/21/2012 - 01:46 | 2083501 xcehn
xcehn's picture

China and Russia are salivating at the prospect of America's collapse by its own hand.  Sadly, the US is by far its own worst enemy.

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