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Rupee trade option to keep Venezuelan oil flowing

IANS  |  New Delhi 

The government may initiate a arrangement with to prevent disruption of supplies from the Latin American country following threats from the to extend like sanctions there as well.

Diplomatic sources said that a mechanism akin to Rupee-Rial between and is being looked at where will be paid in rupee in the branch of an for its oil, while this money can be used by to import and other essential items from

Venezuela is the fourth-largest supplier to after Saudi Arabia, and It accounted for about 11 per cent of India's supplies in 2017-18, supplying close to 18 million tonne (MT). India imported 155 MT of oil in 2017-18. The imports are expected to hit over 170 MT in FY19.

"India and Venezuela discussed the mechanism to continue the oil at last month's Petrotech meeting in This is being further discussed at official level so that a payment mechanism around Indian rupee is operationalised," said an official source privy to the development.

The total trade between India and Venezuela currently stands at about $6 billion and is heavily tilted in favour of the Latin American country due to by India. The main items of Venezuelan imports from India include products, machinery, organic chemicals, cotton, iron and and vehicle parts.

Diplomatic sources quoted earlier said that or deal has been a non-starter, as in the past Venezuela has favoured bilateral deals with Indian companies rather than locking supplies of medicines with

This experience has not been a happy one for Indian companies such as and Dr Reddy's, who also faced payment issues earlier there. But now with Venezuela itself facing severe shortages, India sees an opportunity to re-start talks on trade arrangements.

It is worth noting that India's trade deficit with Iran narrowed when the latter was on sanctions, as Iran felt compelled to use up its rupee reserves. India's experience in rupee-rouble trade with the erstwhile has also been good.

The US is likely to disapprove of such efforts, but India also does not want to lose yet another from its import list that could have a bearing on its

The US is seeking to cut off Venezuela's as part of its efforts to build pressure on to step down. The US has recognised as the The sanctions mean that anyone using the US channels or having big presence in the US and also continuing to deal with Venezuela will also face restrictions.

In view of this, Indian buyers such as and (formerly Essar Oil) have already expressed their concern. These company are big importers of oil from Venezuela. In fact, accounted for 80 per cent of Venezuelan to India in 2018 at 2,70,000 barrels a day. But the company sources said it has decided to cap from Venezuela in view of the sanctions.

Alternate payment mechanism in rupee and trade arrangement is expected to keep oil flowing from the Latin American country even with hardening of US sanctions.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, March 14 2019. 20:42 IST