Sources report that Iran and countries that purchase its oil — such as India, China and South Korea — have reached an agreement in order to circumvent US sanctions on Iran’s oil exports and central bank. The agreement stipulates that the oil will be purchased in the local currency or, in the case of China, by using gold reserves. In this way, Iran can collect oil revenues even after bank transfers to and from Iran have been banned.
Iran is encouraging its businesses to import goods from South Korea, India and China so that it can barter its oil for those countries’ goods and services.
Unlike other international corporations, South Korean companies such as Samsung are active in the Iranian market. Samsung has strengthened its industrial and economic presence in Iranian projects due to the ease with which the company is paid. For example, Samsung is paid in Korean won that is deposited into Seoul banks. In return, to bypass the sanctions, the money used to purchase Iranian oil is also deposited into these Seoul banks.
The situation is different with China because of the extent of its oil transactions with Iran. The two countries agreed that Iran’s oil exports would be purchased through the yuan and gold. According to some sources, Iran was paid with gold for its last two oil shipments to China, although oil exports from Tehran to Beijing have dropped due to price disagreements. There was a 54% decline from March 2011 to March 2012.
New Delhi and Tehran have agreed to use Indian rupees for purchasing Iranian oil exports to India. This pushed Indian companies to consider opening commercial and industrial channels with Iranian businesses to export Indian products. However, in a recent visit to New Delhi, US Secretary of State Hillary Clinton requested that India further cut its Iranian oil imports, which Indian authorities have announced has been done.
In 2011, India had bought 14 million fewer barrels of oil than in the previous year. The sources also pointed out that India imported only 269,000 barrels of oil from Iran in April 2012 compared to 449,000 in April 2011.
Iranian opinions vary regarding the usefulness of trading oil for gold. Some economists believe that this agreement was only made to bypass the sanctions against oil exports. However, other economists believe that this is a positive arrangement if the gold effectively moves into Iranian banks.
Economic analyst Nirsy Qurban proposed another plan where China would purchase goods that Iran needs from Europe (but no longer has access to) to later re-export it to Tehran.
In that context, Iraqi Foreign Minister Hoshyar Zebari told his Iranian counterpart Ali Akbar Salehi that “Baghdad has mobilized all of its potential” for the May 23 round of nuclear talks in Iraq’s capital. The meeting will be attended by Iran, the five Security Council countries and Germany.
During their meeting on the sidelines of the Non-Aligned Movement Foreign Ministers Summit in Sharm el-Sheikh, Egypt, Zebari said he “hopes to achieve positive results during the Baghdad talks, results that serve the interests of all parties, including Iraq, which is a key regional and international player.”