India to pay gold for Iran oil, China may follow

[swissaustrian]

India to pay gold for Iran oil, China may follow
http://rt.com/news/iran-india-gold-oil-543/

--------------------------------------------------------------------

The funny and untold part of the story is this:
Most of the Indian gold was bought from the IMF.
I bet you $10000 ( ) that the Indians have never taken delivery. There is speculation that the IMF doesn't even store gold, but just has paper claims on gold (mainly) stored by the NY FED. This came up in a subcomitee hearing chaired by Dr Paul:

Monetary Policy Subcommittee: IMF & Gold Pt. 1 - 06/23/11 - YouTube

Monetary Policy Subcommittee: IMF & Gold Pt. 1 - 06/23/11 - YouTube

Monetary Policy Subcommittee: IMF & Gold Pt. 2 - 06/23/11 - YouTube

Monetary Policy Subcommittee: IMF & Gold Pt. 2 - 06/23/11 - YouTube

If my speculation is true, India will have to take delivery of gold stored at the NY FED, because Iran will certainly NOT accept gold stored in New York.

[ancona]

I remember what happenned the last time an oil producing nation tried to insert gold in to the picture. [hint: libya]

[PMBug]

Yeah, I mentioned this in the total perspective vortex thread earlier this morning. I didn't consider the IMF gold sale at the time. I'm sure India has some reserve (ie. non-IMF) gold that they can use. Most likely any gold being traded is paper claims to gold held by the LBMA system in London. I doubt Iran will be able to repatriate that, so it will be interesting to see if they insist on delivery or trading through a different exchange (PAGE? Shanghai?).

[h4rdware]

This does seem to come back to the core material in 'Another (Thoughts!)' which was the root of all the FOFOA stuff which has bubbled out of it since then (in fact, it is odd that the oil link is one of the things which is largely absent from FOFOA's interpretation).

...specifically, that gold has been used in part trade for oil, under the table, and that commitments here extend to unmined gold for 10 years into the future (although, the period originally quoted in 1997 has now expired).

If this is the case, then any country trying to use gold to buy oil would have to use their own locally held gold, and would probably be met with great resistance in trying to do so because it upsets any existing deals (partial payment with $ only, unmined gold) and the currency applecart at the same time.

Any attempt to use 'custodial' gold held somewhere else (London, NY) stands no chance of working, because it was already used for the same purpose, long ago.

Not saying it's true - or the only explanation. But it's another 'compatible view' on the many pieces still dancing in the air. One of many.

[DoChenRollingBearing]

@ swissaustrian

Good thread! I agree that India almost surely did NOT take physical possession of their IMF gold they bought at $1040. And $1040, would be about as low as gold will ever get: "The India Put".

IMO, India and China would be "Los Estupidisimos" to pay for oil with gold. NO WAY I would pay gold for oil if President Bearing ran either country. Pay Iran with whatever fiat they would accept.

[DCFusor]

I hear you can buy Iranian fiat real cheap right now...

[PMBug]

Rumors are swirling that India and Iran are at the negotiating table right now, hammering out a deal to trade oil for gold. Why does that matter, you ask? Only because it strikes at the heart of both the value of the US dollar and today's high-tension standoff with Iran.

Tehran Pushes to Ditch the US Dollar

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

We know where that situation led – to a US government suffocating in debt while its citizens face stubbornly high unemployment (due in part to the high value of the dollar); a failed real estate market; record personal-debt burdens; a bloated banking system; and a teetering economy. That is not the picture of a world superpower worthy of the privileges gained from having its currency back global trade. Other countries are starting to see that and are slowly but surely moving away from US dollars in their transactions, starting with oil.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. A major portion of the dollar's valuation stems from its lock on the oil industry – if that monopoly fades, so too will the value of the dollar. Such a major transition in global fiat currency relationships will bode well for some currencies and not so well for others, and the outcomes will be challenging to predict. But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

The Petrodollar System
...

More (highly recommended): http://www.caseyresearch.com/cdd/demise-petrodollar

[PMBug]

A reputed Israeli intelligence website has claimed that India is opting for gold to repay crude oil supplies from Iran. Given the US and EU embargo on Iran, payment in hard currency, such as the US dollar or euro, is very difficult; hence, this barter.

The website, Debkafile, said the transaction will be routed through UCO Bank, the Kolkata-based public sector lender. However, when contacted, a senior bank executive said he had not heard of any plans to settle oil payments in gold. A senior finance ministry official said he did not wish to comment on the issue. When reached over the phone, economic affairs secretary R Gopalan, who has been leading the talks with Iran, said he was busy in a meeting and did not respond to a text message.

The report on the Israeli website coincides with the visit of an Indian official delegation to Tehran last week to find ways to continue the bilateral trade between Iran and India in spite of the sanctions imposed for forcing Iran to forsake its alleged plans for developing nuclear weapons.

While the use of gold as currency may help India get around the proposed freeze on Iranian central bank's assets and the oil embargo that the EU foreign ministers have agreed to impose on Monday, any outflow of sovereign gold will not go undetected, bringing in the political consequences of flouting the West-imposed embargo.
...

More: http://timesofindia.indiatimes.com/b...w/11634184.cms

[PMBug]

Rickards weighs in:

...
When asked about India buying oil from Iran with gold, Rickards responded, “To the extent I’ve been surprised by anything in the world lately, it’s that things I could see coming are happening faster than anticipated. Again, in the wargame in 2009, we contemplated these kind of scenarios. We thought they would play out in 2013, 2014, but here they are, early 2012, playing out in earnest.

For every action there is a reaction. In other words the US likes to think we severely damaged Iran by forcing them out of the dollar system. But Iran is saying, in effect, ‘Keep your dollars. We have another payment system, it’s called gold.’

There’s a lot of gold in India and they are willing to exchange that for oil. You don’t need a banking system and you don’t need dollars. So I think the US, by throwing its weight around, may find because they’ve weakened the dollar so badly that people don’t just stand there and take it. So what happened this week was full scale financial war. We’ve cut Iran out of the dollar system and caused hyperinflation in Iran and they’ve responded.

China is ready to jump into the same game. They have a banking system and it connects to the Russian banking system and Russia has a fair amount of gold. So there could be a whole network among Central Asian countries, China, Russia, India, Iran and others, who say the time has come leave the dollar system completely.

(These countries will say) Let’s get our own payment system going. Let’s use our own trade currencies. Let’s use gold as a foundation. It’s exactly what I talked about in my book, but having forecasted all of this I am surprised to see it happening so quickly. This could be the beginning of the end of the dollar.”

http://kingworldnews.com/kingworldne...he_Dollar.html

[ancona]

Quite interesting PMBug. Think about the possible outcomes here. When Libya announced they wanted to form a gold dinar or some equivalent, what happened next? That's right, the ruler was killed and his prosperous country was bombed back in to the stone age. What happened to Iran when they announced they would no longer sell oil for dollars? We radically stepped up the saber rattling and accusations of nuclear ambitions. Now, we have two carrier groups in the Persian Gulf, waiting for the right time to bomb them back in to the stone age as well.

If the dollar loses hegemony, it's over for the USA.

[PMBug]

Iran is to consider accepting gold as payment for oil and other commodities in what is seen as a fresh attempt to skirt international sanctions on the country's nuclear programme and ease their impact on Iranian businesses and consumers.

"In addition to the U.S dollar and currencies of the trading countries, Iran could take gold in its commercial transactions with other countries," Mahmoud Bahmani, Iran's central bank governor, told domestic Iranian news agencies.
...
Already, Iran has started to receive Indian rupees and Chinese renminbi instead of dollars for its oil sales from India and China, the two biggest importers of its crude oil.

A separate barter arrangement also exists. "Iran imports goods from China and India instead of the hard currency and faces no problem in this regard," Mr Bahmani said. It is not clear how these barter deals work. It is also unclear if these agreements are designed to allow Iran to import grain to feed its population of 74 million or to help these countries clear the debt they have accrued through purchases of Iranian oil.

Mr Bahmani made clear that Iran's trade with other countries would not be limited to the dollar and "any country could pay with either its own currency or gold."

Local business people say Iran has already agreed with Turkey, South Korea, and Japan to carry out trade in their national currencies. Turkey said on Tuesday it was talking with countries such as Saudi Arabia and Libya to diversify its energy supply, which depends heavily on Iranian oil.

But Taner Yildiz, energy minister, added that Ankara was not bound by the US or the EU sanctions. "Turkey will never lose its strategic co-operation with Iran," he said. Turkey, South Korea, India, and China have all increased their gold reserves in recent years.
...

http://gata.org/node/11039

[escobar]

You may have already seen this 4 part video. But it I thought it was informative on the whole Petrodollar, euro, war situation. I have no TV anymore so this is my entertainment

This is part 4 but you can find 1-3 on the tab to the right on you tube.

Ron Paul: The PetroDollar - Part 4/4 - YouTube

Ron Paul: The PetroDollar - Part 4/4 - YouTube

[PMBug]

Beijing is planning to avoid U.S. financial sanctions on Iran by paying for oil with gold. China’s imports of the metal are already large, and you can guess what additional purchases are going to do to prices.

On the last day of 2011, President Obama signed the National Defense Authorization Act for Fiscal Year 2012. The NDAA, as it is called, attempts to reduce Iran’s revenue from the sale of petroleum by imposing sanctions on foreign financial institutions conducting transactions with Iranian financial institutions in connection with those sales. This provision, which essentially cuts off sanctioned institutions from the U.S. financial system, takes effect on June 28.
...
...China has already been trading its produce for Iran’s petroleum, but there is only so much gai lan and bok choy the Iranians can eat. That’s why Iran is also accepting, among other goods, Chinese washing machines, refrigerators, toys, clothes, cosmetics, and toiletries.

The barter trade works, but Iran needs cash too. As it is being cut off from the global financial system, the next best thing is gold. So we should not be surprised that in late February the Iranian central bank said it would accept that metal as payment for oil. Last year, China imported $21.7 billion in Iranian oil and exported $14.8 billion in goods and services. As the NDAA goes into effect, look for Beijing to ship gold to Iran to make up the difference.
...

http://www.forbes.com/sites/gordonch...d-to-buy-gold/

I couldn't find any real evidence that China was planning to move forward with gold bartering, but it's a pretty logical assumption. Jim Sinclair seems to believe it's going to happen:

The implications of China paying for Iranian oil in gold is the most important event in the modern history of gold

1. It is reasonable to assume that China has been threatened with total or at least selective exclusion from the SWIFT system if it pays in any currency for Iranian oil.

2. Gold has been decided by China as the means of making payment for massive international purchases free of the SWIFT system.

3. Other Asian and Middle Eastern nations will now see the gold they hold as money free of Western economic interference.

4. Gold now is not only money free of liability, but also free from interference regarding settlement by the long arm of Western influence.

5. The SWIFT system is becoming ever more a weapon of Western international political will.

6. In case of war anywhere, it is now demonstrated for all to see that only gold will buy the materials required. Paper currencies are under the SWIFT system’s control in settlement.

7. Far from being a barbaric relic, gold is now clearly the money of state survival in every sense.

8. It is reasonable and possible for the supply of physical gold to fall far behind the size of the massive short positions now common to algorithm and hedge fund paper shorts. That will make an effective cover at a reasonable price as compared to a certain day’s close impossible the following day on an exogenous event.

9. It may not be possible to use TA of any nature to determine a price of overvaluation for gold. Should the USA decide to take on China in full out economic war with the physical market totally illiquid, such as through isolation from the SWIFT system, consider the gold price that might result.

http://www.jsmineset.com/2012/04/23/...aying-in-gold/

[Jetstream]

There is a reason why India fired off a test missile proving to the world she has intercontinental ballistic capabilities.

I think it was literally a warning shot that other countries best not mess with her over her intentions to go this route.

India is no Libya. Besides it will be hard for the west to attack her under the guise of wanting to bring democracy there.