Revolutionizing Bilateral Trade: ADNOC and IOCL’s Landmark Crude Oil Transaction under New LCS System

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New Delhi: A significant milestone has been achieved in strengthening bilateral economic relations as the Abu Dhabi National Oil Company (ADNOC) and the Indian Oil Corporation Limited (IOCL) successfully concluded the inaugural crude oil transaction through the recently implemented Local Currency Settlement (LCS) system. This pioneering transaction involved the sale of around 1 million barrels of crude oil, with settlement conducted in both Indian Rupees (INR) and UAE Dirhams (AED).


The Indian diplomatic mission in the United Arab Emirates issued a statement highlighting the transformative potential of LCS, not only in the context of bilateral economic ties but also in broader global economic interactions.

The LCS framework was established following the exchange of a Memorandum of Understanding (MoU) during the recent visit of Prime Minister Narendra Modi to the UAE. This agreement is anticipated to substantially reduce transactional complexities and time, while also fostering the utilization of national currencies for cross-border trade.

The LCS mechanism affords traders the flexibility to select the payment currency based on mutual consensus. Moreover, any surplus balance in local currencies resulting from transactions can be invested in diverse local currency assets, including corporate bonds, government securities, and equity markets.

This innovative approach is poised to bring about transformative changes not only in the economic association between India and the UAE but also in wider global economic involvement.

Although the oil transaction between ADNOC and IOCL represents the second major interaction under the LCS, the first such exchange involved gold. In this previous instance, a well-known UAE gold exporter sold 25 kg of gold to an Indian buyer, resulting in an invoice amounting to approximately Rs 12.84 crore.

The success of this initial gold transaction showcased the viability and efficiency of the LCS mechanism.

Petroleum and its derivatives constitute a substantial portion of the bilateral trade between the two nations. In the previous year alone, the trade in petroleum products accounted for a significant US$ 35.10 billion, representing 41.4% of the total bilateral trade volume.

The UAE stands as the fourth-largest contributor of crude oil and the second-largest supplier of LNG and LPG to India.

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