India wants to secure a waiver for imports from the US, which is why it has significantly reduced its oil purchase from Iran after the ties between the two countries soured
As petroleum-related sanctions on Iran come into effect from November 4, Indian refiners will pay for oil in Indian currency using UCO Bank and IDBI Bank, according to a report by The Economic Times.
India wants to secure a waiver for imports from the US, which is why it has significantly reduced its oil purchase from Iran after the latter's ties with the US soured.
India risks being cut off from the US financial system if it continues to maintain financial transactions with Iran without a waiver. Before the sanctions kick in, Iranian oil exports have dropped significantly as many countries have curbed their purchase under pressure from the US.
Companies like Indian Oil Corporation, Mangalore Refinery & Petrochemicals (MRPL) and Nayara Energy import Iranian oil because it comes with cheaper freight and longer 60-day credit period. Indian companies plan to lift Iranian oil in September and October for which they will need to pay after November 4.
UCO Bank and IDBI Bank have been chosen to route the oil payment to Iran since both banks have no exposure to the US financial system. UCO Bank has handled similar transactions in the past, hence it will be the preferred bank.
The rupee can be used by Iran to pay for imports from India.
The US had promised waivers to countries importing from Iran heavily, if they promise to reduce their imports. India is ready to slash its imports from Iran significantly to win the waiver but it is unclear when the US will grant it, sources told the paper. India is the second-biggest client of Iran and sources nearly one-tenth of its crude supplies from there.
Indian refiners are unable to reject cheaper Iran oil at a time when the fuel prices in the country are touching record lows. New Delhi has said that technical configuration of many refiners makes it dependent on Iran.India wants to secure a waiver for imports from the US, which is why it has significantly reduced its oil purchase from Iran after ties between the two countries soured.