India attempting to bypass US economic sanctions against Iran
Tehran, The Indian government on Friday (June 22) announced it would replace the US dollar with other currencies, such as rupee and euro, to make payments for its oil imports from Iran.
Since the country meets some 10 percent of its oil requirement through imports from Iran, it is trying to, in addition to continuing barter trade between the two countries that has been in place over the past few years, use other ways in transactions with Iran to bypass US sanctions. Using rupee in transactions is among these solutions.
Prior to adopting the barter scheme for transactions with Iran, the Indian government had secured Washington's consent, in a bid to correct the trade imbalance in oil through barter of goods in its economic relations with the Middle Eastern state.
New Delhi has always attempted to use rupee for its oil and trade transactions with Tehran since 2012 when the US, United Nations and EU imposed their sanctions against Iran's peaceful nuclear program up to 2015 when several rounds of negotiations eventually led to the signing of the Joint Comprehensive Plan of Action (JCPOA) between Iran and P5+1 in July 2015. Following the conclusion of the JCPOA, under Iran's pressure, New Delhi gradually agreed to use other international currencies in trade with Tehran.
As per the mechanism created in 2012 under the impact of US sanctions, Indian exporters received money in rupee for their sales to Iran and kept it at India's UCO Bank. This is because the government of the South Asian state paid for its purchases from Iran in rupee.
Nevertheless, in the same year, Iranian Petroleum Minister Bijan Zangeneh said that Iran is not willing to receive money for its oil exports to India entirely in rupee, stressing that, at least, 55 percent of the payments should be made in common international currencies.
US President Donald Trump's decision to withdraw from the JCPOA in May and his directive to reinstate strict sanctions against Iran by August 6, have created a serious challenge to many countries already engaged in economic transactions with Tehran.
Although abiding by the US unilateral sanctions, unlike those of the UN Security Council which had been removed following the signing of the JCPOA, is not mandatory for other countries, international companies consider it inevitable to comply with them fearing US retaliatory measures.
To satisfy the US and avoid its anger, many of these firms have already begun to stop their operations in Iran.
However this time, the Indian government has decided to, by hook or by crook, bypass the severe sanctions targeting Iran's oil exports and foreign investments in the country's energy sector and, once again, use the rupee-rial payment mechanism with the assistance from UCO Bank.
When selling goods to Iran, Indian companies also used, and are still using, the money deposited by the Central Bank of Iran at the UCO Bank in rupee as the Indian bank does not have any relations with the US and, thus, will not be affected by Washington's sanctions.
The Indian government knows that there are still $300 million in the primary rupee-rial account at the UCO Bank and deem it highly likely that the amount was likely to increase in coming months.
Earlier, Indian External Affairs Minister Sushma Swaraj said, India follows only UN sanctions, and not unilateral sanctions by any country.
Financial Express (FE) wrote on Saturday, As reported recently, the State Bank of India has told Indian oil refiners that the euro payment route to Iran for crude oil import will not be available after November 3, 2018, the day US sanctions against Iran come into effect.
This would effectively mean that the last physical transaction between Iran and Indian refiners � Indian Oil, BPCL and HPCL � will happen around the first week of September, given refiners get a 60-day credit window. Post that, in the last two months, only bills will be settled, R Ramachandran, director (refineries), BPCL, had earlier told FE.
As per the agreements signed between Tehran and New Delhi, India is expected to import more than 21 million tons of crude oil from Iran during 2018-20.
Source: Iran Daily