India imports around 10% of its crude oil requirement from Iran and the Islamic nation is the third-largest supplier to India.
The government is looking to revive its rupee payment mechanism for crude oil supplies from Iran in view of the impending sanctions by the US on the Persian Gulf country.
“We are keeping all options open given the challenges we may face during the sanctions,” said a government official.
India imports around 10% of its crude oil requirement from Iran and the Islamic nation is the third-largest supplier to India. For 2018-19, India has a target of importing 21 million tonne of crude from Iran.
US President Donald Trump has decided to withdraw from JCPOA, also called the Iran Nuclear Agreement, which was agreed upon in 2015 under which the Tehran was to curb its nuclear programmes in return of lifting of financial sanctions.
The UK, France, Germany, Russia and China are also parties to JCPOA, and these countries are yet to take a call on whether to go with the US decision.
During the last stringent sanctions regime against Iran (2012-2015), India made payments to Iran for crude oil in rupee through UCO Bank. Iran, in return, used the money to pay for other imports from India.
India back then first used a Turkish bank to pay Iran for crude oil. However, starting February 2013, it paid almost 50% of the oil import bill in rupees and kept the rest pending till opening of payment routes. When restriction were eased in 2015, India started clearing the dues.
Currently, Indian oil firms first transfer funds to State Bank of India (SBI), which, in turn, uses Germany-based Europaeisch-Iranische Handelsbank to pay in euros to Iran. Though European nations have said they will not comply with the US sanctions, the scenario is still uncertain.
To assess the mood of the nations in the European Union (EU) with regard to the US sanctions on Iran, a Indian team comprising officials of the finance ministry and the petroleum and natural gas ministry was sent to meet officials in these countries. A top official had said India should remain aware of what the world is thinking. “The last time when the US had imposed sanctions, Europe followed. We want to be prepared for a repeat scenario,” the official told FE.
According to the official quoted first, India does not need to seek exemption from the US to trade with Iran. However, given that dollar trade will not be available, India is preparing for any unforeseen scenario.
As reported recently, SBI has told Indian oil refiners that the euro payment route to Iran for crude oil import will not be available after November 3, 2018, the day US sanctions against Iran comes into effect.
This would effectively mean that the last physical transaction between Iran and Indian refiners — Indian Oil, BPCL and HPCL — will happen around the first week of September, given refiners get a 60-day credit window. “Post that, in the last two months, only bills will be settled,” R Ramachandran, director (refineries), BPCL, had earlier told FE.