India aims to sign pact with Iran for oil payments in rupees

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.

“We have to do some paper work. It should be signed as early as possible. We are aiming for this month,” one of the sources said.

India, which got a waiver from the latest tougher US sanctions against Tehran on Monday, used a similar mechanism in the previous round of sanctions but settled only 45% 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 US 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.

Meanwhile, Japanese buyers of Iranian crude oil are expected to prepare to resume imports from the Middle Eastern nation after Tokyo was granted a waiver from US sanctions that kicked in this week, trade minister Hiroshige Seko said yesterday.

Exemptions have been granted to Iran’s biggest oil clients – Japan, China, India, South Korea, Taiwan, Italy, Greece and Turkey – which allow them to import at least some oil for another 180 days. Iran’s oil exports have fallen sharply since US President Donald Trump said at mid-year he would re-impose sanctions on Tehran over its disputed nuclear programme, but with waivers in hand, the Middle Eastern nation’s major buyers could scale up orders as soon as next month.

“It would be up to the judgment of private firms, but based on this decision, the (Japanese) companies would likely prepare for resuming Iran crude imports,” Seko told reporters. Asked whether any cuts in imports would become necessary, he said: “I cannot comment on import volumes”.

Seko also declined to comment on whether Japanese imports would fall to zero after the 180day exception period expired, saying that would depend on future negotiations between Tokyo and Washington.

Japanese Foreign Minister Taro Kono later said Tokyo would continue to have close discussions with the United States to ensure stable energy supplies and no adverse impact on Japanese companies.