New Delhi: India is considering Venezuela’s proposal to use rupee for trade payments to protect the current oil import from the South American nation facing hardening US sanctions.
The US has imposed a series of sanctions on Venezuela to squeeze its oil revenue and force the nation’s President Nicolas Maduro to step down. The US, which recognised opposition leader Juan Guaido as the president of Venezuela in January, is now considering imposing new financial sanctions aimed at cutting the Latin American nation’s access to the international financial system.
Current sanctions bar US firms from doing business with Venezuela but leave importers from India and other countries unhurt. The US, however, has been piling diplomatic pressure on India to cut import. Once the US cuts off Venezuela from the international financial system, Indian refiners will be forced to either stop import or build an alternative payment channel. India has already advised its refiners to avoid payment system controlled by the US, an official said. Only private refiners Reliance Industries and Nayara Energy import Venezuelan oil, about 300,000 barrels per day.
Given the massive American influence on the international financial system, the only viable alternative for refiners in India is to pay in local currency, the official said.
Following a proposal from Venezuela and suggestion from refiners in India, the oil ministry has proposed setting up an alternative mechanism whereby entire payment will be made in rupee, the official said, adding that it is aimed to be like the one available for sanctions-hit Iran, which currently supplies India about 300,000 barrels per day.
Venezuela has plans to double crude exports to India, its oil minister Manuel Quevedo had said last month
The oil ministry has sent the proposal to the ministry of external affairs, which is yet to respond to this, the official said. The rupee trade can secure Indian buyers for Venezuela’s oil but most of the sale proceeds may lie unused in India because of huge trade imbalance between the two countries, an official said.
The trade between Venezuela and India is worth $6 billion, of which exports from India comprise barely1%. Crude oil imports mainly dominate the trade. Venezuela’s import of Indian drugs, food and textile has fallen in recent years due to its financial crisis.
The US has asked India to not become “the economic lifeline for the Maduro regime” in Venezuela, US secretary of state Mike Pompeo said on Monday after meeting India’s foreign secretary Vijay Gokhale.
Reliance Industries, the biggest Indian importer of Venezuelan oil, on Wednesday said it hasn’t increased its purchase from Venezuela.