India may next month be forced to end 18-month old arrangement of paying for Iranian crude oil imports through a Turkish bank as a new set of US sanctions against the Islamic nation comes into force from February 6. India has been, since July 2011, using euros to clear most of its purchases of Iranian oil through Ankara-based Turkiye Halk Bankasi. As much as 55 per cent of the USD 10 billion oil imports from Iran are settled through Halk Bank, while the rest of the payments are made in rupees in Kolkata- based UCO Bank.
The new US Treasury sanctions, which go into effect from February 6, bar banks from transferring Iran's oil revenues from importing nations to Tehran.
This means Iran would be forced to keep its oil revenues in local bank accounts in countries purchasing its oil. It can only use those oil earnings to purchase "permissible" services and goods, such as food, medicine and basic medical equipment, from those oil customers as imports back into the Islamic Republic.
Officials said these sanctions, if implement, would mean that National Iranian Oil Co (NIOC) will have to essentially keep all the revenue it earns from selling oil to Indian
refiners in Uco or any other permitted local bank. These can be used for buying permissible goods and services.
This may sound workable but the problem is that Iran's imports from India are just one-fifth of the revenue it earns from sale of oil.
With US sanctions barring sale of any defence or technology intensive equipments, Iranian imports from India will continue to remain low. Also, New Delhi has not allowed Iranians to invest in its securities or debt.
A team of Indian officials is in Tehran since Friday to work out modalities of payments post February 6, they said adding that New Delhi has so far not sought US exemption from the sanctions.
About Rs 14,000 crore has accumulated in NIOC's Uco Bank branch and the Iranian national oil firm does not know how to use it.
If the euro payments stop and all of the payments are made in rupees, Uco account balance will swell overnight,