Facing sanctions by the US and the European Union,Iran has agreed to accept 45 per cent of the value of its oil exports to India in rupees to be parked in UCO Bank. This bank,headquartered in Kolkata,was selected because it has no US or European exposure its overseas presence is limited to Hong Kong,Singapore and China.
This decision was arrived at after talks last month between New Delhi and Tehran aimed at ensuring stability in payments between the two nations.
India has a $12.68-billion annual oil import bill from Iran which constitutes 12 per cent of its total oil imports.
At present,the Iranian central bank,BMJI,holds an account with UCO Bank with a deposit limit set at $1 billion under an understanding between the two countries last October to keep 20 per cent of Irans oil export revenue in rupees.
India pays the balance 80 per cent in Euros to Iran through the Turkish bank,Turkiye Halk Bankasi,but there are apprehensions here that Turkey may be forced to stop this after the move by US and the EU to ban any entity involved in Iranian oil and gas or petrochemical sectors.
As part of the January agreement,part of the rupee payments will also be deposited in two Iranian private banks,Bank Parsian and Karafarin Bank. These banks are still not under sanctions which have been imposed on all of Irans state-owned banks. Its been learnt that both these private banks have applied to the Reserve Bank of India for opening branches in India. RBI didnt respond to an email sent on this.
Sources said that the new agreement is part of a considered option as a move by Indian Oil Corporation to open an account with Russias Gazprombank was not progressing well as the Russian side had not yet conveyed the formalities required for opening the account.
India and Iran also agreed to work towards stepping up exports from India,including project exports,for which the Commerce Ministry would prepare,in consultation with the RBI,a mechanism for operationalising Oil for Projects for suitable projects,said sources. Besides doubling commodity imports,Tehran is keen on taking Indias help in setting up urea plants in Iran as well as in executing the Chabahar port and developing the International North-South Transport Corridor,they said.
Indian exports,including oil for projects,would help even out the trade disparity between the two and reduce the problem in settling crude oil payments. Indias export to Iran at present is $2.7 billion against the over $12 billion of oil imports. Iran is Indias second largest supplier of crude after Saudi Arabia.
Last week,Petroleum Minister S. Jaipal Reddy said: It will be our endeavor in future to tap the Iran source fully…Iran was very accommodative. India has maintained that it will abide by UN sanctions on Iran but is not duty-bound to implement unilateral sanctions by the US and the EU.
Work In Progress
* India has a $12.68-billion annual oil import bill from Iran which constitutes 12 per cent of its total oil imports.
* At present,20% is paid in rupees; rest in Euros via Turkish bank,Turkiye Halk Bankasi
* Fears that Turkey may be forced to stop this
* Agreement to park 45% in rupees in UCO Bank,two Iranian private banks,Bank Parsian and Karafarin Bank.
* Both also agree to work out an Oil for Projects agreement