India Seeks to Pay Iran Oil Imports Fully in Rupee

Indian Oil Secretary Vivek Rae told reporters today that India will seek paying for Iranian oil imports fully in rupees. India currently pays 45 percent of the import value of Iranian oil in rupees and Indian refiners hold back the remaining 55 percent as Iran explores avenues for alternative payment mechanisms. (Reuters, 12 September)

The value of Indian currency has sharply declined against the dollar lately and the country would prefer to settle its imports in rupee and save foreign currency.

Iranians have not said if they were ready to accept all payments in rupee. Iran has been unable to repatriate more than half its oil export revenues due to stringent banking sanctions.

India to Pay for Iran Oil in Rupees

India will continue paying for Iranian oil in hard currency until 1 July when the EU sanctions against Iran’s financial sector goes in full effect. Beyond that date, India is ready to pay in rupees, Bloomberg and Press TV reported today.

New Delhi’s rupee payments to Iran will be deposited in the Indian state-run UCO bank, which does not have US operations and is unlikely to be affected by the global sanctions, the Indian oil sources told Bloomberg.

India currently imports $9 billion worth of Iranian oil and $2 billion in other goods annually while exporting $2.7 billion worth of goods to Iran.

File Photo: India's Rupees

India to Pay for 45 Percent of Oil Imports in Rupees

India has signed an agreement with Iran to pay for 45 percent of its oil imports in rupee, or equivalent of $4 billion annually. A 70-member Indian delegation visiting Tehran on Saturday was discussing with Iranian officials what products India could send to Iran in exchange for the $4 billion account [IRNA, 10 March].

The two sides did not disclose how India would pay for the remaining 55 percent of its oil imports considering the current sanctions that prompted the rupee payment agreement in the first place. It was also not clear how the crude oil prices, quoted in dollar, would be calculated in rupee considering the Indian control over its currency exchange rates.

India to Pay for Iran Oil in Rupee Letters of Credit – India Press

A Barter Trade of Oil for Tea

The Calcutta Telegraph reports today that Iran and India are finalizing a deal on how India would pay for the purchase of Iranian crude oil. Indians will reportedly open letters of credit in rupee for the crude oil. Iran would then use the rupee credit line to purchase Indian goods such as tea and machinery [The Telegraph, 11 July].

The agreement, as reported by the Indian press but not yet confirmed by the Iranian authorities, would represent a major set back for Iran. It is effectively a barter trade of oil for tea (and other goods). It will force Iran to purchase Indian goods as opposed to similar goods available elsewhere, and not necessarily in best terms. The agreement would be, however, a major victory for India, opening up the possibility of globalizing the rupee.