India will pay for Iranian oil using rupee from November

Sources have said that India will be settling all their payment for Iranian oil. This is because US sanctions will make it difficult to settle trades through European banks.

US President, Donald Trump withdrew from a 2015 nuclear accord with Iran in May. He ordered the renewal of US sanctions. Some sanctions already have taken effect since August 6th. The sanctions that affect the oil and banking sectors will take effect on for November the 4th.

India does not want to default on making payments. That is why they are bracing up for an eventuality that they have to make a payment. India has selected UCO Band and IDBI Bank for facilitating payment to Iran.

The refiners of India such as state-owned Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd. (MRPL) are currently using State Bank of India and the Europaeisch-Iranische Handelsbank AG based in Germany to buy Iranian oil in euros. The State Bank of India has told the refiners that it would stop handling Iranian oil payments from November.

Other sources have said that after the United States had re-imposed its sanctions in May, Iran had already received payments for some cargoes in rupees.

Iran is India’s third largest supplier. India has planned to import about 25 million tonnes of crude oil from Iran in the current fiscal. This value went up from 22.6 million tonnes imported in 2017-18. Companies like Reliance Industries have stopped buying oil from Iran and others are also scaling it down. They have high hopes of winning a sanction waiver from the United States.

The Iranian oil for rupee policy seems to be quite welcome among the Iranians. They may use the money to pay for equipment and food items it buys from India. In the previous round of sanctions, UCO Bank handled the rupee payments. So, they are quite experienced with the issue.

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