A Barter Trade of Oil for Tea
The Calcutta Telegraph reports today that Iran and India are finalizing a deal on how India would pay for the purchase of Iranian crude oil. Indians will reportedly open letters of credit in rupee for the crude oil. Iran would then use the rupee credit line to purchase Indian goods such as tea and machinery [The Telegraph, 11 July].
The agreement, as reported by the Indian press but not yet confirmed by the Iranian authorities, would represent a major set back for Iran. It is effectively a barter trade of oil for tea (and other goods). It will force Iran to purchase Indian goods as opposed to similar goods available elsewhere, and not necessarily in best terms. The agreement would be, however, a major victory for India, opening up the possibility of globalizing the rupee.