Reuters in June reported that India is looking to revive the its earlier rupee payment mechanism with Iran. The other is the concern that tanker tracking data may become less reliable, as Iran may try to use some "unconventional" methods of keeping its oil sales on track, like switching off tracking devices on tankers-a "solution" that Tehran is said to have used in the previous round of sanctions in 2012-2015.
India may revert to paying Iran in rupees for the oil it buys from its third largest supplier as USA sanctions will from November 4 block use of United States dollars to settle such trades, a top official said Thursday.
In May, US President Donald Trump pulled out of an worldwide nuclear deal with Iran and announced new sanctions against the country, the third-largest producer among the Organization of the Petroleum Exporting Countries (OPEC).
However, India has been appraising the United States about its energy demand to fuel its economy as well as the importance of Iranian oil.
U.S. President Donald Trump's administration is working to provide alternative sources of oil to American allies that will be affected because of U.S. sanctions on Iran, Financial Times writes, citing a senior administration official.
The rupee-rial arrangement was used to purchase oil from Iran before sanctions were lifted against it three years ago. Not only is Iran India's second-biggest oil supplier, but India is also the second-top oil client of Iran - the first being China. It has also been hoping that the USA will give it some relief from the sanctions. UCO Bank has handled similar transactions in the past, hence it will be the preferred bank.
UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the United States financial system. Some sanctions took effect on August 6, while those affecting the oil and banking sectors will start from November 4.
This will likely further reduce the country's exports, which might easily drop another 350,000 barrels a day by November, down to about 1.3 million. India had planned to import about 25 million tonnes of crude oil from Iran in the current fiscal, up from 22.6 million tonnes imported in 2017-18.