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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 - 14:55 | 2084486 JW n FL
JW n FL's picture



Low 2011 Default Environment Further Boosted by 59.4% Recovery Rate

The U.S. high yield default rate finished 2011 at 1.5%, falling below 2% for the second consecutive year. Over the past 32 years, the default rate has ended shy of 2% 16 times.

The weighted average recovery rate on the year's defaulted issues was a robust 59.4% of par, higher than 2010's 56.7% and up from the recent cyclical low of 34.1% recorded in 2009.

A new report from Fitch Ratings includes:

- full details on 2011 key default and recovery trends
- updated long term default and recovery statistics
- vintage default rates
- industry specific default and recovery rates
- recovery rates by seniority and year
- other important credit indicators

View full report

The top industry default rates in 2011 included: paper and containers, 10.3%; transportation, 7.4%; and utilities, 5.9%.

Approximately 80% of the 2011 defaulted issues were rated 'CCC' or lower at the beginning of the year, for a ‘CCC’ or lower par default rate of 6%. Isolating 'CCC' or lower bonds trading at the distressed level of 80% of par or lower at the beginning of the year, Fitch Ratings calculates that 30% of these subsequently defaulted.

If you are having trouble opening the report, please follow this link: 

Sat, 01/21/2012 - 14:57 | 2084495 JW n FL
JW n FL's picture



Numbers dont lie...

Gold / Silver.. pushed bought down buy the FED at the end of the Year.. so Gold and Silver not performing..


Soverign Debt.. did not default last year.. so even though Ratings are down.. the rating in no way reflect the true risk..


The Prcing models of Gold and Silver in no represent the value in PM's.


and the poor HFT's who live and die by these numbers and ratings.. it is a shame really.

Sat, 01/21/2012 - 15:54 | 2084508 JW n FL
JW n FL's picture




Norman T L Chan: Hong Kong – an offshore renminbi business centre

Speeking points by Mr Norman T L Chan, Chief Executive of the Hong Kong Monetary

Authority, on the Regulatory Requirements for the Adjustments to Renminbi Risk

Management Limit and Net Open Position, Hong Kong, 17 January 2012.

* * *

The development of Hong Kong as an offshore RMB business centre achieved encouraging

results in the past year. Trade settlement using RMB reached RMB2 trillion; RMB deposits

almost doubled; and total issuance of dim sum bonds exceeded RMB100 billion. I am very

confident that the trend of solid development will continue in 2012.

With the continued growth in both turnover and depth of the offshore RMB (CNH) market in

Hong Kong, the Hong Kong Monetary Authority (HKMA) considers that conditions are now

ripe to appropriately relax certain regulatory requirements on the RMB business of banks in

Hong Kong.

First, on the regulatory requirements of the RMB net open position, the HKMA has decided to

raise the limit for RMB net open position, from not exceeding 10% to not exceeding 20% of

the bank’s total RMB assets or liabilities.

Second, currently the HKMA requires each Participating AI to maintain the sum of RMB cash

or balances with the RMB Clearing Bank and the People’s Bank of China, Shenzhen branch,

at no less than 25% of its total RMB customer deposits (referred as RMB risk management

limit). The HKMA has now decided that Participating AIs can include two more types of RMB

assets, namely “RMB sovereign bonds issued in Hong Kong by the Ministry of Finance of

China” and “RMB bond investment through the Mainland interbank bond market”, in the

calculation of this limit.


Looks like all those Muni's are going to be rolled onto the banks balance sheets..  

The Muni, State and National Bond Market just got covered in China. 

offloading the Bonds to the Banks Frees up how much cash? Buy more Gold and Silver to trade to Iran for a discount on Petro Purchases? 

 and while the World is burning bridges that lead to America.. our Government still is exporting wealth to all corners of the Earth.

America has been gutted and is now not only being gutted.. but as well being shown the door by these 3rd World Countries.

So America has been Gutted by short sighted Duly Elected Government Officials..

and now those same Duely Elected Lobby Whores who sold America for pennies on the dollar.. are cutting America Throat with regard to America’s reserve currency status.

One day people will wake up and look around and ask what happened? where did it all go? why did the U.S. Government do what NO standing Army in the World could do (at the time)... destroy America.

Mean While Washington DC does NOTHING to improve the Quality of Life or service the aging infrastructure of America.. instead Wall Street spends Trillions in China taking that once backwards farmer nation Vertical.

India? we provided the monies to the nuclear power who's new bestest friend is Iran.. and has been for a good little while!

so was it Russia or India or a bit of both who got Iran up and going with its Nuke Program? or was it Turkey and France?

it doesnt matter!

Our Country is being driven by short sighted, quarterly bonus seeking bottom feeding trash!

and they have a 0% FED Window to draw down from to fund their ongoing and never ending lobby of short sighted profit seeking.. all the while those who have a clue and are screaming STOP! are considered Terrorists.

Where the FUCK? is the NSA or CIA or any of them? no one inside those offices are smart enough to see America being destroyed?

they are just smart enough to prosecute "We the People" and make sure to over look Wall Street is only covered by Civil Liabilities!

Dumb Fucking Sheep are the cause of this.. because they are not smart enough to grasp what is right under their noses. The facts, actions.. are ignored in favor of swill spewed in heavy rotation by Wall Street owned media..

Apart from credit growth, the surge in renminbi deposits in Hong Kong was another important factor behind the fast growth in foreign currency deposits. Renminbi deposits rose from RMB314.9 billion at the end of December 2010 to RMB553.6 billion at the end of June 2011, reaching 18.4% of total foreign currency deposits. The growth in renminbi deposits was mainly driven by a net increase in renminbi receipts by corporate customers through cross-border trade settlement. Renminbi trade settlement conducted through Hong Kong banks reached around RMB800 billion in the first half of 2011, more than doubling the 2010 total.



Sat, 01/21/2012 - 16:24 | 2084793 ozziindaus
ozziindaus's picture

India will not betray the US. There is simply too much investment and business interest between the two nations. Same applies to China. But one irony/contradiction worth noting. What's with all the Pro-China rhetoric I'm hearing on ZH? Isn't there consensus that China is and has been for 50 years where most ZH readers fear the US is heading?

Sun, 01/22/2012 - 11:20 | 2086389 Snidley Whipsnae
Snidley Whipsnae's picture

"India will not betray the US. There is simply too much investment and business interest between the two nations. Same applies to China. "


Countries kick other soverigns out all the time. Then the country that does the kicking out 'nationalizes' the business interests and properties of the businesses that have been kicked out. Google Smedly Butler to see the normal US response.

Cuba did exactly this... Why do you think the US has attempted to stop trade with Cuba and ROW since the sixties? Coca Cola, Pepsi, the mafia casinos, the huge sugar cane plantations... all nationalized by Cuba.

Venesuela is another example... US Oil companies are trying to sue over their lost interests... good luck with that one.

Russia, Argentina, India (vs England), Georgia, etc... all the same... the list is very long... Hell, look how many US indians were 'kicked out' of their own country when settlers moved west. Moral: 'if you can't defend it, you don't own it'.

When China is ready they will kick out every biz that isn't entirely Chinese owned... but only after they capture all the technology and the foreigners build plants and add equipment. China's biggest trading partner is Europe, not the US.

Sun, 01/22/2012 - 02:05 | 2085921 jonjon831983
jonjon831983's picture

So, is the solution to invade this particular oil producer?

Sun, 01/22/2012 - 06:16 | 2086112 honestann
honestann's picture

So, who will join the FIAT exclusion zone?
Count me in.  In gold we trust.
gold == international money.

Sun, 01/22/2012 - 06:46 | 2086131 Colonial Intent
Colonial Intent's picture

What gets me is that TPTB are trying to keep a capitalist system going at all costs, capitalism will end at some point due to resouce limits but democracy will not, we can change the economic system without losing the democratic one.


Sun, 01/22/2012 - 11:25 | 2086395 Snidley Whipsnae
Snidley Whipsnae's picture

CI... The US is a republic and is not supposed to be a democracy. People think they are the same but they are definitely not.

You should do a little homework.

imo, what we need is a return to the republic as founded and a return to sound money as explained by the Austrian School.

Spend a little time on those two for starters.

Sun, 01/22/2012 - 08:19 | 2086190 onthesquare
onthesquare's picture

To me that is a lot of wealth and at $1800 dollars/oz.  That amounts to $864 billion dollars.

That is less than $864 for every man women and child living in India.

The US threw that much at the banks and then forgot about it.

Sun, 01/22/2012 - 11:29 | 2086398 Snidley Whipsnae
Snidley Whipsnae's picture

"The US threw that much at the banks and then forgot about it."


Speak for yourself... I damn sure have not forgot about it...

Sun, 01/22/2012 - 12:14 | 2086481 BigInJapan
BigInJapan's picture

The fact that India is Boeing's only export customer for their new Sub-killer, the P-8, should raise some hackles.


Sun, 01/22/2012 - 16:00 | 2086859 RECISION
RECISION's picture

Lets not forget inflation.

Tidal waves of dollars that used to be used in foreign trade will end up washing back on American shores.

Staggering amounts of it will be coming home.

The only question is - when and how fast.

Certainly it will be an accelerating exponential thing.

ohh... and UGLY...

Sun, 03/11/2012 - 08:09 | 2244578 Gelir
Gelir's picture

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