India set to pay for Iranian oil using rupee from November

India set to pay for Iranian oil using rupee from November

India will settle payments for Iranian oil using rupee through local banks starting in November as USA sanctions will make it hard to settle trades through European banks, two industry sources said on Thursday. Some sanctions took effect from August 6 while those affecting the oil and banking sectors will start from November 4.

Tsukioka, who also serves as chairman of refiner Idemitsu Kosan, however, did not comment on the details of each refiner's reaction. Before the sanctions kick in, Iranian oil exports have dropped significantly as many countries have curbed their purchase under pressure from the US.

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

Tsukioka said in July that Japanese oil refiners would likely stop loading Iranian crude oil from mid-September, with final shipments to arrive in the first half of October. India is yet to take a call on complying with the U.S. sanctions on Iran.

In May, the Trump administration had pulled out of the Iran nuclear deal and brought back economic sanctions against Tehran.

Indian refiners are now using State Bank of India and Germany-based Europaeisch-Iranische Handelsbank AG to buy Iranian oil in euros.

India risks being cut off from the USA financial system if it continues to maintain financial transactions with Iran without a waiver.

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

Under the mechanism, India used to pay in euros to clear 55 per cent of its dues through Ankara-based Halk bank. These channels would get blocked from November.

The official said this time around the entire 100 per cent of Iranian oil import bill can be paid in rupees. India is the second-biggest client of Iran and sources almost one-tenth of its crude supplies from there. In the following year, the Iranian supplies jumped to 27.2 MT to catapult it to the third spot.

India wants to secure a waiver for imports from the USA, which is why it has significantly reduced its oil purchase from Iran after the latter's ties with the U.S. soured. The liability and costs associated with successful transit are paid by the seller until the goods are received by the buyer.

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