India aims to sign an initial agreement with Iran this month to settle all their oil trade in rupees through India’s UCO Bank, two Indian government sources said.
India, which got a waiver from the latest tougher U.S. sanctions against Tehran on Monday, used a similar mechanism in the previous round of sanctions but settled only 45 per cent of the payments in rupees.
Iran used the funds to import goods from India, a move that had helped boost India’s exports to Tehran.
Paying for Iranian oil in rupees will also strengthen the Indian currency against the U.S. dollar.
Indian refiners will make payments in rupees for purchases of Iranian oil made since September, one of the sources said. Iran grants a 60-day credit period to Indian refiners.
Sources also said the U.S. wants India to restrict its monthly purchases of Iranian oil to 1.25 million tonnes, or 9 million barrels, during the waiver period from November.
Indian Oil Corp, India’s top refiner, and Mangalore Refinery and Petrochemicals Ltd. placed an order last week with National Iranian Oil Co to buy a total of 9 million barrels of oil in December.
IOC would buy 6 million barrels of Iranian oil, while MRPL would import 3 million barrels, the sources added.
India is likely to be one of eight countries which can temporarily import Oil from Iran post sanctions, sources indicated. US has agreed to exempt eight countries since they have made “significant reductions” in Oil imports. US sanctions on Iran will kick in November 5.
India, which is the second biggest buyer of Iranian Oil after China, is being pushed by the US to restrict its monthly purchase to 1.25 million tonnes or 15 million tonnes a year (300,000 barrels per day), down from 22.6 million tonnes (452,000 barrels per day) bought in 2017-18 financial year, according to sources.