India to pay in rupees for Iranian oil

Daniel Fowler
September 23, 2018

Crude exports at 1.6 million bpd are down by around 35 percent compared to Iran's peak 2.5 million bpd exports in April, just before the USA announced it was slapping sanctions back on Tehran.

In 2010, India's central bank ceased using a Tehran-based regional body, the Asian Clearing Union, to handle transactions with Iran.

"We have told the Indians consistently, as we have told every nation, that on November 4th the sanctions with respect to Iranian crude oil will be enforced, and that we will consider waivers where appropriate, but that it is our expectation that the purchases of Iranian crude oil will go to zero from every country, or sanctions will be imposed", Secretary Pompeo said, noting that many countries would need "a little bit of time to unwind".

In the Bush administration and during the Obama administration until the 2015 nuclear deal with Iran, some United States allies, including Japan, South Korea and India, were given waivers from sanctions related to Iranian oil imports.

In September, the trend of reduced Iranian oil exports has continued, and analysts expect further cuts from some of Iran's oil customers.

"We are in touch with all stakeholders in the matter", Kumar said. The other is the concern that tanker tracking data may become less reliable, as Iran may try to use some "unconventional" methods of keeping its oil sales on track, like switching off tracking devices on tankers-a "solution" that Tehran is said to have used in the previous round of sanctions in 2012-2015.

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USA oil production in August averaged 10.9 million barrels per day, the EIA estimates - up by 120,000 barrels per day in June. US West Texas Intermediate crude for October delivery was up 7 cents, or 0.10 per cent, at $70.39 a barrel.

India, Iran's leading oil client after China, is also developing the Chabahar Port in the Middle Eastern nation. Some sanctions took effect from August 6 while those affecting the oil and banking sectors will start from November 4.

UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the U.S. financial system. As the U.S. sanctions on the import of crude oil from Iran looms large, India is in touch with both Iran and the USA on the complicated matter.

The official said this time around the entire 100 per cent of Iranian oil import bill can be paid in rupees.

The statement comes two months before a second tranche of United States sanctions on Iran are reimposed.

Indian Oil Corp, Mangalore Refinery and Petrochemicals (MRPL) and Nayara Energy (formerly Essar Oil) are some of the heaviest Indian importers of Iranian oil that comes with cheaper freight and a longer 60-day credit period. The remaining 45% payment was paid in rupees in accounts Iranian oil companies had with the UCO Bank.

South Korea, in turn, has replaced Iranian crude with imports from Saudi Arabia and Iraq, according to the energy ministry, but it is also in talks with the United States to get a waiver.

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