India began paying for Iranian crude oil in rupees, Charan Singh, executive director at Indian state-owned UCO Bank told Reuters on January 8th.
This is the first such payment since the US reimposed its second batch of sanctions on November 5th, 2018. This is in continuation of a previous story, in which India said it had not yet worked out a payment mechanism to circumvent the sanctions.
India was one of eight countries that received a six-month waiver from the sanctions, allowing them to import some Iranian oil.
“India, the world’s third biggest oil importer, wants to continue buying oil from Iran as it offers free shipping and an extended credit period, while Iran will use the rupee funds to mostly pay for imports from India,” Reuters reported.
“Today we received a good amount from some oil companies,” Charan Singh said. He did not disclose the names of the refiners or how much had been deposited.
ZeroHedge reported that this takes place amid reports that India is planning on circumventing the US dollar in oil trades with Russia, Venezuela and Iran. The trades would be made either in rupees or under a barter agreement.
To reinforce the notion that it plans to purchase Iranian oil, New Delhi recently issued a notification exempting payments to the National Iranian Oil Co (NIOC) for crude oil imports from steep withholding taxes, enabling refiners to clear an estimated $1.5 billion in dues.
“In the previous round of U.S. sanctions, India settled 45 percent of oil payments in rupees and the remainder in euros but this time it has signed deal with Iran to make all payments in rupees as New Delhi wants to fix its trade balance with Tehran,” Reuters reported.
Furthermore, Indian imports from Iran were approximately $11 billion between April and November 2018, with oil accounting for 90% of the sum.
Singh said that Indian refiners had made payments to 15 banks. But payments will be made into the accounts of only 9 Iranian lenders as one is closed and the US has imposed secondary sanctions on five others. The nine banks are Saman Bank Corp., Bank Pasargad, Bank Eghtesad Novin, Karafarin Bank, Bank Samayeh, Middle East Bank, City Bank, Bank Hekmat Iranian, and Tourism Bank.
Iranian Foreign Minister Javad Zarif arrived in India on January 7th. At the New Delhi airport, Zarif told reporters that Iran and India had good relations even after re-imposition of US sanctions, adding:
“We have a good banking agreement with Indians, which was signed this fall and after [re-imposition] of sanctions, and this agreement allows our country to continue both exports and imports while meeting its financial needs.”
Zarif also emphasized that Iran has been, and will continue to be a reliable supplier of crude oil to India.
Iran is also devising payment mechanisms to continue trading with partners such as China, Russia and Turkey, in addition to India. The EU is also reportedly working on mechanisms to establish non-dollar trade with Iran, however it is moving slower than expected, Zarif said.