Iran, India to Keep Settling Oil Trade in Rupee

India’s Ambassador Saurabh Kumar said on Saturday that his country will continue importing Iranian oil with the help of the new payment mechanism agreed between the two sides.

Kumar told an Iranian news agency that India’s oil imports from the Islamic Republic has not decreased, and the country has been purchasing an average of 1.25 million tons of crude oil from Iran during the past months.

Regarding the efforts to remove the payment hurdles and abandoning US dollar in mutual transactions, the senior official said India’s UCO bank has opened rupee accounts with several Iranian banks so they can deposit the oil money in those accounts. The mechanism will be operational in less than two weeks, he added. 

India, Iran’s second biggest oil customer after China, has been granted sanctions waiver to import some 300,000 barrels per day of Iranian oil for 180 days, starting from Nov. 5.

However, the two sides are making every effort to ensure the continuance of future trades in oil and non-oil sectors.

Kumar had announced on Wednesday that according to the agreements made between Iranian and Indian high-ranking officials, the two sides are to sign a preferential trade agreement (PTA) and a joint investment one in near future.

“The PTA will be penned during an Iranian delegation’s tip to India,” he said.

Iran-India trade volume can reach from its present $15 billion per year to $20 billion, the ambassador said, if the necessary grounds are provided.

Earlier on Wednesday, India’s UCO Bank Managing Director Atul Kumar Goel said that New Delhi has devised a scheme to buffer Iran’s oil money against US sanctions to continue oil imports from the Islamic Republic.

"India will deposit payments for crude oil imported from Iran into escrow accounts of five of their banks held with state-run UCO Bank Ltd," Atul Kumar Goel said.

Goel reiterated that payment into multiple escrow accounts will reduce the risks of Iranian bank accounts being frozen in case the US brings new banks under sanctions.

The new move by New Delhi comes as it purchased $9 billion of crude oil from Iran in the financial year that ended March 21, 2018 during which the south Asian nation took in 450,000 barrels a day.

Iran’s exports to India averaged 540,000 barrels per day in the current Iranian year.

Iranian Minister of Health and Medical Education Hassan Qazizadeh Hashemi suggested last week that Tehran may replace European and American pharmaceuticals with Indian companies for imports of medicines.

"A major part of the European and the US markets is dominated by the Indian pharmaceutical companies, and the Islamic Republic has also used their products in its industries," Qazizadeh Hashemi said at the end of his three-day visit to India last week.

"Unfortunately, our approach towards European and US companies is a traditional one that should change. This change of view will surely benefit the country in the future," he added.

India, which imports nearly 80 percent of its crude requirements, sees Iran imports crucial because many of its major refineries are adjusted to Iranian grade.

Tehran also offers better credit terms than other oil suppliers and accepts payments in rupees, which other Middle Eastern oil producers demand in US dollars.

India is the second largest importer of Iranian oil after China. The two countries have an arrangement under which 55 percent of oil payments are made in euros and 45 percent in rupees through the UCO Bank.

New Delhi has also stressed its commitment to the development of Iran’s strategic Chabahar port which India sees crucial to its connectivity ambitions.