Iran Buys Indian Sugar for 1st Time in 5 Years

Indian traders will export raw sugar to Iran for March and April delivery, five trade sources said, the first Indian sugar sales to Tehran in at least five years as Iran struggles to secure food supplies under sanctions imposed by the United States.
Under the sanctions, Iran is blocked from the global financial system, including using US dollars to transact its oil sales, Reuters reported on Tuesday. 
Iran agreed to sell oil to India in exchange for rupees but it can only use those rupees to buy Indian goods, mainly items that are in short supply domestically.
Trading houses have contracted to export 150,000 tons of raw sugar for shipments arriving in March and April at $305 to $310 per ton on a free-on-board basis, the trade sources told Reuters this week.
“Oil payments have piled up in UCO Bank. Iran is keen to utilize the payments to buy sugar and other food items,” said one of the sources, a Mumbai-based dealer with a global agricultural trading firm, who asked not to be identified as he was not authorized to speak to media.
Iran’s state buyer, the Government Trading Corporation, purchased the sugar to ensure ample supplies in the coming months, said a second source, a Mumbai-based exporter. Iran usually buys sugar from Brazil, the world’s biggest producer and exporter of the sweetener.
Cargill, Bunge and other global traders have halted food supply deals with Iran because the new US sanctions have disrupted the banking systems used to settle payments, industry and Iranian government sources said in December.
Iran is paying a premium of as much as $7 per ton compared to other buyers, as traders are anticipating a risk of a delay in payments, said a third source, also based in Mumbai, who did not want to be identified because of the sensitive nature of the US sanctions.
The exports will help reduce swelling sugar inventories in India, the world’s second-biggest sugar producer, but could weigh on global prices that have risen 8.9% so far in 2019 to 13.1 cents per pound as of Monday.

UCO Fortunes Revived

Renewed US sanctions on Iran’s oil exports are giving a boost to the profits of one of India’s smaller state-owned banks, which has been struggling under the weight of a mountain of bad loans, Bloomberg reported.
Kolkata-based UCO Bank expects its privileged status of processing refiners’ payments for Iranian oil shipments to add more than 8 billion rupees ($110 million) to annual earnings, according to Chief Executive Officer Atul Kumar Goel. 
Indian refiners are required to deposit any money destined for Iran without interest with UCO Bank during periods when US sanctions are in force.
UCO Bank has been losing money since 2015 in the absence of the float from refiners.
“Being involved in the country’s oil imports from Iran gives us access to zero-interest funds, which refiners place with us,” Goel said in a recent interview at his Kolkata office. “It will improve our net interest income as well as operating profit.”
UCO Bank was first designated by the Indian government as the payment bank for Iranian oil in 2012, after the US tightened an earlier round of sanctions to get Iran to accept controls on its nuclear program. 
The bank was chosen because of its limited international presence, which made it less vulnerable to any repercussions from its involvement in the oil trade, processed in euros and rupees to avoid exposure to the US banking system.
Those sanctions were lifted in 2015, leading to a drop in UCO Bank’s profits, as other Indian banks entered the business. But the lender has resumed its former privileged role as US President Donald Trump pulled out of the 2015 nuclear deal last year and started reimposing penalties.
India was one of eight countries benefiting from a US waiver, allowing it to import 9 million barrels of Iranian oil a month until April. 
UCO Bank, which was chosen by the government to pay for the imports during the waiver, said it started receiving the funds to pay for these shipments earlier this year and now has a steady float of more than 100 billion rupees.
"Money from refiners has started coming in from January and we are making payments on a daily basis to exporters. The bank is paying out more than one billion rupees a day for the oil,” Goel said.
The boost to earnings from the interest-free float may bolster the bank’s efforts to come out of a so-called Prompt Corrective Action Plan—under which lenders are restricted from making loans while they mend balance sheets—which was imposed by the Reserve Bank of India. 
UCO Bank will also get an injection of about 33 billion rupees by March 31 to strengthen its risk buffers, as part of the government’s capital infusion plan announced on Wednesday.
As much as a quarter of UCO Bank’s loan book had soured as of Dec. 31, though Goel said he doesn’t expect that to increase in the coming quarters.