India has begun paying Iran for oil in rupees, a senior bank official said on Tuesday, the first such payments since the United States imposed new sanctions against Tehran in November.
Washington gave a six-month waiver to eight countries, including India, allowing them to import some Iranian oil.
India, the world’s third biggest oil importer, wants to continue buying oil from Iran as it offers free shipping and an extended credit period, while Iran will use the rupee funds to mostly pay for imports from India.
“Today we received a good amount from some oil companies,” Charan Singh, executive director at state-owned UCO Bank told Reuters. He did not disclose the names of refiners or how much had been deposited.
New Delhi recently issued a notification exempting payments to the National Iranian Oil Co (NIOC) for crude oil imports from steep withholding taxes, enabling refiners to clear an estimated $1.5 billion in dues.
An industry source said India’s top refiner Indian Oil Corp and Mangalore Refinery & Petrochemicals have made payments for Iranian oil imports. Neither was immediately available for comment.
Iran is devising payment mechanisms including barter with trading partners like India, China and Russia following a delay in the setting up of a European Union-led special purpose vehicle to facilitate trade with Tehran, its foreign minister Javad Zarif said earlier on Tuesday.
In the previous round of U.S. sanctions, India settled 45 percent of oil payments in rupees and the remainder in euros but this time it has signed deal with Iran to make all payments in rupees as New Delhi wants to fix its trade balance with Tehran.
Indian imports from Iran totalled about $11 billion between April and November, with oil accounting for about 90 percent.
Singh said Indian refiners had previously made payments to 15 banks, but they will now be making deposits into the accounts of only 9 Iranian lenders as one had since closed and the U.S has imposed secondary sanctions on five others.
The nine banks are Saman Bank Corp., Bank Pasargad, Bank Eghtesad Novin, Karafarin Bank, Bank Samayeh, Middle East Bank, City Bank, Bank Hekmat Iranian, and Tourism Bank.