In this meeting, as well as development of mutual trade ties, Iran and India finalized talks on ratification of preferential tariffs on specific equipment needed for implementation of Iranian Chabahar Port project besides financing supply of required machinery for the project, which is located on Iran’s coast along the Gulf of Oman and is backed by India to provide an alternative trade route between India and Afghanistan.

“Monetary and banking transactions have slowed down the implementation of Chabahar project but thanks to the held talks between Indian FM and with American officials and the US waivers, we are hopeful that the required machinery and equipment will arrive in Chabahar within one or two years,” the Indian envoy Gaddam Dharmendra said.

“Due to US sanctions, we are faced with some difficulties with purchasing Iranian oil, while two of Indian refineries are constructed to refine Iranian oil,” Dharmendra said, “The two refineries are running with low-profit margin, presently.”

He proposed that the Indian embassy in Tehran can prepare a list of Iranian products for the Indian market to ease the exchange of goods between the two countries.

Gholamhossein Shafei, the chairman of Iran’s Chamber of Commerce, Industries, Mines and Agriculture (ICCIMA), for his part, underlined that Iran and India have to do their best not to let their mutual ties be undermined by the cruel US sanctions.

He also described that one of the barriers on the way of developing bilateral commercial ties is that Indian banks demand guarantees from Iranian tradesmen. He announced the readiness of the Exports Guarantee Fund of Iran for issuing the required guarantees.

In May 2016, India and Iran signed a bilateral agreement under which India would refurbish one of the berths at Shahid Beheshti Port, and reconstruct a 600-meter-long container handling facility at the port.

On January 15, Iranian Foreign Minister Mohammad Javad Zarif met and held talks with Indian Prime Minister Narendra Modi in New Delhi, where the two sides discussed mutual ties, trade and economic cooperation, especially in the field of energy and also collaboration in Chabahar port, as well as significant regional and international issues during their meeting.

On January 1, the Director-General of Sistan and Baluchestan Road Maintenance and Transportation Department General Ayyoub Kord said that import of basic goods via Chabahar Port registered a 238 percent growth in the nine months of the current year (March 21-Dec. 22) as compared to the last year’s corresponding period.

He went on to say that Chabahar Port enjoys high capability and potential in unloading basic goods timely, adding, “with the increasing trend of loading and unloading operation of these types of goods, suitable ways have been provided for exporting products via this port.”

On February 2, the Indian government allocated some Rs 100 crore (i.e. one billion Rupee or above $14 million) for the strategic Chabahar Port project in southeastern Iran that gives India connectivity to Afghanistan bypassing Pakistan.

India is one of the largest consumers of crude oil and since Iran has been one of the key suppliers, the country hopes the US will extend sanctions waiver, Singh said, Hindu Business Line reported.

On November 5, the US announced exempting eight countries, including India, from the sanctions for importing oil from Iran. This exemption is for six months and Washington will review the 180-day waiver it gave to India and seven others after April 2019.

Asked about what IndianOil’s strategy will be once the six-month period is over, Singh told BusinessLine “Let us see, we have six months.”

On the impact of sanctions on oil supply in the market, an Indian oil trader said on the condition of anonymity that even before the waiver was given, the market had already factored in a shortfall from Iran.

“So, the market was prepared. In fact, India has played its card very well — while it has not buckled under the US sanctions, it has continued to get reasonable supply from Iran.”

By continuing to buy from Iran, India has also been able to sustain a balance in the market, the trader said.

Meanwhile, senior officials in the government said India is likely to continue purchasing oil from Iran in 2019, although at lower levels than the previous year, and were hopeful that it will not lead to acrimony with the US. New Delhi is expecting a positive result when the US reviews the waiver, according to government officials.

India and Iran, however, have yet to resolve the way in which payments have to made for oil. New Delhi is keen that the rupee payment mechanism, used to partly pay for oil from Iran last time there were sanctions against the country, will be used this time as well. But alternative mechanisms, in which payments are made through currencies other than dollar, are also being examined.

The trilateral meeting is being held in Tehran, with a focus on fast-tracking the operations on development of Chabahar Port, which is considered a gateway to golden opportunities for India, Iran and Afghanistan to expand trade with Central Asian countries.

The meeting is attended by Iran’s Ports and Maritime Organization (PMO) Managing Director Mohammad Rastad, India’s Secretary of Economic Relations in the Ministry of External Affairs T. S. Tirumurti, and Afghanistan’s deputy minister of Transport and Civil Aviation.

Should the sides reach consensus over the drafts of Chabahar agreement, they will be scheduled to ink the final deal later today.

Chabahar Port, which lies on the Sea of Oman, provides the closest and safest transit channel to Afghanistan. So far, India has sent three cargo ships of wheat and grains to the port to be trucked to Afghanistan.

The port is easily accessible from India’s western coast.

Under an agreement signed between India and Iran in May 2016, India is to equip and operate two berths in Chabahar Port Phase-I with a capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.

According to The Hindu BusinessLine, Krishna said, “we are trying for a rupee-riyal payment mechanism for Chabahar port project.”

“Basically, the guarantees will have to be given in rupees now instead of in dollars or euros,” he added.

The issue was discussed with a high-level delegation led by Mohammad Rastad, Deputy Minister and Managing Director for Ports and Maritime Organization, Islamic Republic of Iran, during a visit to India earlier this week. The plan to set up an alternative payment mechanism reveals that India is willing to go ahead with the project even if the diplomatic lobbying for a waiver from the US on Chabahar port project fails to yield results.

India’s bid to start commercial operations at the port has been held up due to banking challenges arising from the fresh round of sanctions imposed by the US.

India has picked Bandar Abbas-based Kaveh Port and Marine Services company to run the port as a stop-gap arrangement for 18 months till a full-fledged manage, operate and maintain (MOM) contractor is finalized by India Ports Global Pvt Ltd.

“Kaveh Port and Marine Services will start operations on our behalf and we should be ready to make payments to them. But, at present, due to banking difficulties we are not ready. There are banking issues on how to transfer funds and so it is on hold,” a government official said.

“A rupee-rial payment mechanism is the only way out of this,” said Arun Kumar Gupta, Managing Director, India Ports Global. “That is what we are working on. Instead of dollars or euros, all payments to the Iranian side will be under rupee-rial mechanism,” he said adding that a team from India Ports Global will visit Iran in the next few days to “work out things”.

“Irrespective of the sanctions, we are trying to go ahead with the project; a new payment system will have to be put in place,” he stated.

India Ports Global and Aria Banader Iranian Port signed a deal in May 2016 to equip and operate container and multi-purpose terminals at Shahid Beheshti – Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.

Located in the Sistan-Baluchistan Province on Iran’s South-eastern coast, Chabahar port is of great strategic importance for development of regional maritime transit traffic to Afghanistan and Central Asia.