Government officials have said they are putting the finishing touches on a plan under which India would pay Iran for oil in rupees, but Iran would be restricted in what it could buy with those rupees. Chiefly, Iran would be barred from using the money to buy up Indian businesses.
Iran has not said anything in the past few weeks while the idea of rupee payments has been widely discussed in the Indian media. It isn’t known if Iran would find the concept at all attractive, especially with the restrictions on what Iran could buy with rupees.
ONGC said the Indian cabinet would make the final decision on what to offer Iran. It did not say when the proposal would go before the cabinet.
The Reserve Bank of India, India’s central bank, stopped making payments to Iran in December out of fear of getting crossed with US sanctions. The sanctions don’t bar payments for Iranian oil, but foreign banks are required to know that they are not paying for any goods banned under UN sanctions, such as nuclear components. The mechanism India was using meant the Reserve Bank was only given a net figure to pay and had no idea what individual purchases and sales were behind that figure.
India’s Financial Express last week reported that India’s tea producers fear they are paying for the hassle. Bhansali, a major Indian tea exporter, said it sold 4 million kilos of tea to Iran last year, but has not sold even one kilo since the payments problem erupted in December.
India buys more than $1 billion worth of crude oil from Iran monthly. This year, it was able to make one payment of $2.1 billion through a German bank before that route was shut down. India now has a debt of about $3 billion owed Iran.
