India has commenced repaying their oil debt to Iran under a new payment scheme. Earlier, US had reimposed sanctions on Tehran blaming the Islamic Nation for nuclear proliferation and endangering the region.
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The news comes after the Indian government intervened recently to exempt some $1.5 billion of Iranian oil money held at state-owned UCO Bank from withholding taxes. The development also coincided with a visit by Iranian Foreign Minister Mohammad Javad Zarif to India.
UCO Bank “received a good amount from some oil companies” which have pending payments to Iran, its executive director Charan Singh told Reuters.
India is Iran’s second-biggest oil importer after China. Oil accounted for about 90% of Indian imports from Iran, which totalled approximately $11 USD billion between April and November.
“Iran has been and will be a reliable source of oil supply to India,” Zarif said on Monday as he arrived in New Delhi to take part in an annual research forum attended by economists and entrepreneurs. India was among the eight countries which got US waivers late last year to continue crude oil imports from Iran for six months.
Indian refiners have said they want to continue buying Iranian oil for which they are accorded free shipping and an extended credit period. They also pay Iran all in rupees under a new transaction mechanism which Tehran has worked out with its trade partners in the face of dawdling by the EU to put a much-hyped special purpose vehicle into operation.
Trading partners such as India, Russia, China and Turkey have agreed to use national currencies in transactions with Iran. India settled 45% of oil payments in rupees and the remainder in euros in the previous round of sanctions but this time it has been allowed to make all payments in rupees.
Iran will use the money to import Indian goods and pay its diplomatic staff based in that country. Indian Union Minister Nitin Gadkari said on Tuesday his country can provide steel rails and locomotive engines to Iran, and receive urea in return.
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