India to buy Iran oil in rupees after US sanctions on Tehran

Despite the upcoming US sanctions on Iran’s oil and banking sectors, India’s state-owned refiners are going ahead with their plans to import 1.25 million tonnes of crude oil from Tehran by switching payment from dollar to rupee to escape curbs.

Sources told PTI that Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) have contracted Iranian oil for import next month when the US sanctions come into effect.

India and Iran are discussing switching to rupee trade after November 4 when US sanctions on Iran kick in. Iran is willing to accept money in rupee which it can use to pay for wheat, soybean meal and consumer products it buys from India.

Details of the payment mechanism were not forthcoming but sources said IOC and MRPL could use UCO Bank or IDBI Bank to route oil payments.

Currently, India pays Iran in euros using European banking channels which would get blocked from early next month.

When EU joined the US in the first round of sanctions on Iran, India had initially used a Turkish bank to pay Iran for the oil, switched to rupee payment from February 2015 and cleared almost half of the oil import bill. After the historic Iran nuclear deal that year, India started clearing the dues as restrictions on Tehran were lifted and payment routes were reopened.

India wants Iranian oil imports to continue and the US had stated last month that such waiver is possible.