India after trying since December to find a way to pay for imported Iranian crude oil in hard currency, and having run out of options, have decided to pay Iran for the crude in rupee. The Hindu, breaking the news in its today’s edition, said Iran still needs to approve accepting the payments in Indian currency. The National Iranian Oil Company (NIOC) would then open rupee account with Indian banks, with several limitations on how it can use the funds:
- NIOC could use the money to purchase non-strategic/non-military items such as railway imports or commodities.
- NIOC will not be able to use the monies to invest in India or to buy shares or companies.
- India’s Finance Ministry will prepare and submit a list of do's and don'ts for Iranian authorities from the money it gets as part of the crude oil payments.
In February, India started making euro payments through an Iranian bank based in Germany, Europisch-Iranische Handelsbank AG (EIH Bank). But that had to be stopped soon after the German government put an end to the practice. The Indian government also explored the option of opening accounts in Dubai-based Noor Islamic Bank for direct transfer of money to Iran. But the UAE also refused to route payments to Iran [The Hindu, 3 May].
India imports 12 million barrels of crude oil every month from Iran.