In a momentous development that signifies a significant stride toward boosting bilateral economic relations, the Abu Dhabi National Oil Company (ADNOC) and the Indian Oil Corporation Limited (IOCL) have successfully concluded the inaugural crude oil transaction under the newly introduced Local Currency Settlement (LCS) mechanism. This groundbreaking transaction involved the sale of approximately 1 million barrels of crude oil, with settlement carried out using both Indian Rupees (INR) and UAE Dirhams (AED).
According to a statement from the Indian embassy in the United Arab Emirates, the LCS has the potential to bring about a transformative impact not only on the bilateral economic ties but also on broader global economic engagements.
The LCS system empowers traders with the flexibility to select the preferred payment currency through mutual agreement. Moreover, any surplus balance in local currencies resulting from these transactions can be strategically invested in a range of local currency assets, including corporate bonds, government securities, and equity markets.
This innovative approach is poised to revolutionize not just the economic relationship between India and the UAE, but also to reverberate across global economic interactions.
While this oil transaction between ADNOC and IOCL is the second major exchange facilitated by the LCS, the first transaction involved gold. In this prior transaction, a notable UAE-based gold exporter sold 25 kg of gold to an Indian buyer, with the invoice totaling around Rs 12.84 crore.
The successful gold transaction served as a practical demonstration of the feasibility and efficiency of the LCS mechanism. Petroleum and its related products constitute a substantial share of the bilateral trade between the two countries. In the previous year alone, the trade in petroleum products reached a remarkable US$ 35.10 billion, contributing to 41.4% of the overall bilateral trade volume.
The UAE holds the distinction of being the fourth-largest supplier of crude oil and the second-largest provider of LNG and LPG to India.
