India and Iran will begin figuring out a fresh payment channel to resume oil trade, according to a New Delhi official. The US had conveyed to New Delhi that India’s “escrow account” used for Rupee-Rial trade cannot be operated after 2 May. Earlier, India had an option to trade in its national currency to circumvent the sanctions.
New Delhi (Sputnik): India is likely to resume its importing of Iranian crude products, most probably from June, as the two countries will discuss search for a mechanism to trade and bypass Washington’s sanctions.
“Import will not halt for long; nevertheless, the quantum may be subdued for initial months,” a government official said on Tuesday.
Fresh talks are expected resume shortly after the formation of the Indian government in Narendra Modi’s second term, which may have a new petroleum minister in place of Dharmendra Pradhan.
READ MORE: US Sanctions: India to Decide on Oil Imports From Iran After Elections
Last October, India’s Union Minister Nitin Gadkari mentioned a payment systems that would be involved if the two countries agreed to continue oil trade under the sanction regime. As per the plan, payment would be made through Iranian private bank Pasargad, which was allowed to open a branch in Mumbai in 2018. India’s UCO Bank and IDBI Bank, which used to route payments during previous US sanctions on Tehran, would also be used as payment channels.
Difficulties arose when the US conveyed to New Delhi that India’s “escrow account” used for Rupee-Rial trade cannot be operated after 2 May. Earlier, India had an option to trade in its national currency to escape the sanctions. Under the Rupee-Rial mechanism, about 45 per cent of the oil payments to Iran were made in rupees through UCO Bank which was used by Iran to make payments for imports of various products from India.
It is easier to trade in domestic currency as India has the option to route payment through one of India’s state-owned banks, like UCO Bank, which has the least exposure in the US market. But now this route is also under the scrutiny of the Donald Trump administration — this is why the two countries are looking to devise a new payment mechanism.
READ MORE: India Terminates Iran Oil Imports — Envoy to US
Indian External Affairs Minister Sushma Swaraj during the meeting with her Iranian counterpart Mohammad Javad Zarif on 14 May conveyed that a decision regarding the purchase of Iranian crude would only take place after the country’s general elections conclude on 23 May.
In the interim, India ended its imports of Iranian oil, Indian Ambassador to the United States Harsh Shringla told reporters at the country’s embassy in Washington on 23 May.
Shringla pointed out that India imported Iranian oil in April. India opted to follow the US sanctions after the Trump administration decided to end the waivers on 2 May that it granted to eight of Iran’s top oil customers — China, India, Italy, Japan, South Korea, Taiwan, Greece and Turkey — last November.