India has recently signed an agreement with Iran to pay for crude oil it imports from the Persian Gulf nation in rupees. The memorandum of understanding (MoU) was signed following the US letting India and seven other nations to keep buying Iranian oil despite sanctions being reimposed on the Islamic state on November 5th.
Indian refineries will make rupee payments in a UCO bank account of the National Iranian Oil Co. (NIOC). Half of these funds would be earmarked for settling payments for export of Indian goods to Iran.
Even under the US sanctions, India can export foodgrains, medicines and medical devices to Iran. India had won the exemption after it had agreed to cut imports and escrow payments.
Under the 180-day exemption that has been granted, India can import a maximum of 300,000 barrels a day of crude oil. This compares to an average daily import of about 560,000 barrels this year.
India is the second biggest purchaser of Iranian oil. China is the first. Since the sanctions took effect, India has restricted its monthly purchase to 1.25 million tonnes or 15 million tonnes a year. This value has come down from a previous 22.6 million tonne of oil bought in the financial year of 2017-18.
Some other countries will also pay for crude oil in their native currencies. India is the world’s third largest consumer of oil. The country meets almost 80 per cent of its oil requirements through imports. Iran is our third largest supplier of oil. It comes after Iraq and Saudi Arabia. About 10 per cent of our oil needs is met by Iran.
Prior to this, India paid its third largest oil supplier in euros. The country used European banking channels. These channels got blocked in November.