India’s continued oil imports from Iran tied to tough US conditions

The devil lies in the details on how much respite India and seven others have got from the US to import Iranian oil.

The oil companies and Ministry for Petroleum & Natural Gas are still awaiting finer details before working out their next course of action.

“On the face of it, we have been given about six-seven months respite to continue importing the Iranian oil. But whether it is a blanket waiver or India can continue imports without attracting secondary sanctions after the existing contracts expire will be known only once the details are out,” an official in the know said.

“We are yet to examine the details of the significant reduction exemption (SRE) given by Washington to eight countries. One thing is clear though that the exemption has been given with a number of conditions, including a further tapering of oil imports and restricting the goods that could be sold to Iran to balance off purchases of oil made with local currency,” a government official told BusinessLine .

With the US re-imposing sanctions against Iran on November 5 that were lifted as part of the nuclear deal on Iran’s energy, ship building, shipping, and banking sectors, all trading partners were required to stop sourcing oil from the country. While Washington had threatened that it would impose secondary sanctions against countries that continued to trade in oil with Iran beyond November 4, it decided to grant a waiver to eight countries that are dependent on oil imports and have “demonstrated significant reductions’’ in imports from Iran.

“The Obama administration issued SREs to 20 countries multiple times between 2012 and 2015. We will have issued, if our negotiations are completed, eight and have made it clear that they are temporary. Not only did we decide to grant many fewer exemptions, but we demanded much more serious concessions from these jurisdictions before agreeing to allow them to temporarily continue to import Iranian crude oil,” US Secretary of State Mark Pompeo said at a press conference on October 2.

“Countries may be allowed to sell humanitarian goods like food and medicines and some other non-sanctioned items. The details are not yet clear. Exports to Iran may face intense US scrutiny,” the official said.

Since there are banking restrictions in place for trading with Iran, nations sourcing oil from the country like India are expected to pay in their local currencies in an account in the national bank of the importing country.

Payment arrangement

India and Iran already had such a rupee payment arrangement in place during the previous period of economic sanctions to pay for oil which was never terminated but has to be re-activated.

Last time the arrangement was that India will pay for 45 per cent of its oil purchase in rupee and the rest in euros. The rupee payments would be deposited in an account with the UCO Bank, which would then be used by Iran to purchase Indian goods.

“This time the banking channel restrictions are also more stringent making payments in euros more difficult so there is no decision yet on the percentage of trade that is to be done in the rupee. The talks with the Iranians on the matter continue,” the official said.

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