New Delhi Will Pay for Iranian Oil in Rupees

India may revert to paying Iran in rupees for the oil it buys from its third largest supplier, as US sanctions will from Nov. 4 block the use of US dollars to settle such trades, a top official said.

Oil refiners such as state-owned Indian Oil Corp and Mangalore Refinery and Petrochemicals Ltd could use UCO Bank or IDBI Bank to route oil payments to Iran, the official added, Money Control reported.

US sanctions against Iran come into effect from Nov. 4 and will block banking channels.

The official said refiners have booked oil cargoes from Iran for the current month as well as for October. Payment for oil bought in September would be due in November, as Iran provides a 60-day credit period.

India had planned to import about 25 million tons of crude oil from Iran in the current fiscal, up from 22.6 million tons imported in 2017-18. But the actual volumes imported may be far less as companies like Reliance Industries have totally stopped buying oil from Iran and others, too, are scaling it down while hoping to get a sanction waiver from the US.

US President Donald Trump had in May withdrawn from the 2015 nuclear accord with Iran, reimposing economic sanctions against the Persian Gulf nation. Some sanctions took effect from Aug. 6 while those affecting the oil and banking sectors will start from Nov. 4.

The official said Iran is open to accepting rupee payment for oil and may use the money to pay for equipments and food products it buys from India.

UCO Bank had in the previous round of sanctions handled rupee payments.

Currently, India pays its third largest oil supplier in euros using European banking channels. These channels would get blocked from November.

According to a Reuters report, India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the United States against Iran go into effect, three sources familiar with the issue said.

Iran’s Naftiran Intertrade Company, a trading arm for state-owned National Iranian Oil Company, owns a 15.4% stake in Chennai Petroleum, which has two refineries with a total combined capacity of 230,000 barrels of oil per day.

United India Insurance has informed Chennai Petroleum that its new annual policy that is set to take effect from October will not cover any liability related to processing crude from Iran, the three sources said.

This has forced the refiner to cancel a scheduled loading of 1 million barrels in October, they said.


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