With the US granting a 180-day exemption on Iranian oil sanctions to India ahead of the restrictions kicking in from Monday, India and Iran are finalising details of a mechanism that will allow New Delhi to pay Tehran entirely in Indian currency, at a bank in India.
India will revive a previous arrangement of making payments in an account in UCO Bank, which does not have international exposure and is therefore not vulnerable to sanctions. However, in the earlier instance, the oil payments were divided — 45% in rupees deposited in UCO Bank, while 55% was paid in Euros. This time, Iran will take the entire amount in rupees. Tehran is expected to use these funds to import items from India.
This also means that if Iranian banks are banned from the SWIFT payment systems, India will continue to be able to pay for oil imports. The second round of sanctions, will in addition to targeting Iran’s energy sector, take aim at shipping, shipbuilding and financial sectors. Sources said this arrangement has been arrived at after sustained discussions with both Iran and US. Read more