In the meeting of Iran-India Joint Chamber of Commerce with economic and banking activists of the two countries, the MD of UCO Bank Mr. Soma Sankara Prasad said that the bank has played a key role in improving the trade between the two countries and UCO Bank is the only Indian bank which has office in Tehran. He added that the bank has completed a 10-year process for implementing mechanism for payment in national currencies of the two countries and it has tried as a bank to accelerate the trade exchanges between the two states.

On delay for settling the financial obligations, he said that such a similar meeting had been held in the recent past where Indian exporters raised the same complaint, adding that the delay is rooted in decline in India’s oil purchase from Iran, and until 2019 when India used to buy Iran’s oil there was no problem in settling commercial exchange payments because there was enough money in the account but after 2019, the oil purchase was limited and Iran’s rupee deposit in its account was declined.

Prasad emphasized that both countries should find ways for increasing Iran’s rupee deposit in the bank for swift financial transactions, adding that statesmen of Iran and India should talk for finding new ways for increasing their bilateral trade exchanges. He reiterated that UCO Bank only plays the role for accelerating financial exchanges between the two states, and governments and private sectors of the two countries are in charge of increasing the trade exchanges.

Meanwhile Head of Iran-India Joint Chamber of Commerce Mr. Ebrahim Jamili, for his part, pointed to the recent change in Indian government’s approach and expressing interest for improving cooperation to the pre-sanctions era level and said that although he did not know how much India was serious in its recent approach, he called this approach promising.

He emphasized that resolving banking problems will lead to the rise in the trade exchanges, adding that although UCO Bank has been Iran’s trade partner from long time and it has had good cooperation even in the sanctions era but the chamber has some complaints about the bank’s performance.

Jamili went on to say that trade is a two-way road and demands of both sides should be considered, adding that both sides need more trust for cooperation, noting that business partners of Iran has trusted UCO Bank and deposit their money in the bank and they expect the bank to accelerate cooperation for the transfer of money and financial cooperation. Jamili reiterated that both Iranian and Iranian traders do not get their money in due time while Iran and India have signed the MoU for using mechanism of using national currencies.

He added that the chamber received some complaints from both Iranian and Indian traders over the failure of UCO Bank in fulfilling its commitment in timely payments.

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Oil refiners such as state-owned Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) could use UCO Bank or IDBI Bank to route oil payments to Iran, the official added.

U.S. sanctions against Iran come into effect from November 4 and will block banking channels.

The official said refiners have booked oil cargoes from Iran for the current month as well as for October. Payment for oil bought in September would be due in November as Iran provides a 60 days credit period.

India had planned to import about 25 million tons of crude oil from Iran in the current fiscal, up from 22.6 million tons imported in 2017-18. But the actual volumes imported may be far less as companies like Reliance Industries have totally stopped buying oil from Iran and others too are scaling it down in hope of winning a sanction waiver from the U.S.

U.S. President Donald Trump had in May withdrawn from the 2015 nuclear accord with Iran, re-imposing economic sanctions against the Persian Gulf nation. Some sanctions took effect from August 6 while those affecting the oil and banking sectors will start from November 4.

The official said Iran is open to accepting rupee payment for oil and may use the money to pay for equipment and food items it buys from India.

UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the U.S. financial system.

UCO Bank had in the previous round of sanctions handled rupee payments.

Currently, India pays its third largest oil supplier in euros using European banking channels. These channels would get blocked from November.

During the first round of sanctions when EU joined the U.S. in imposing financial restrictions, India initially used a Turkish bank to pay Iran for the oil it bought but beginning February 2013 paid nearly half of the oil import bill in rupees while keeping the remainder pending opening of payment routes. It began clearing the dues in 2015 when the when the restrictions were eased.

Besides, New Delhi sought to get around the restrictions by supplying goods including wheat, soybean meal and consumer products to Iran in exchange for oil.

The official said this time around the entire 100 percent of Iranian oil import bill can be paid in rupees.

Iran is India’s third-largest oil supplier behind Iraq and Saudi Arabia. It was India’s second biggest supplier of crude oil after Saudi Arabia till 2010-11 but Western sanctions relegated it to the seventh spot in the subsequent years. In 2013-14 and 2014-15, India bought 11 MT and 10.95 MT, respectively from it.

Sourcing from Iran increased to 12.7 MT in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 MT to catapult it to the third spot.

Iranian oil is a lucrative buy for refiners as the Persian Gulf nation provides 60 days of credit for purchases, terms not available from suppliers of substitute crudes — Saudi Arabia, Kuwait, Iraq, Nigeria, and the U.S.

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In the wake of US pressures, India will likely cancel rials-rupee trade agreement with Iran, which was inked three years ago.

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According to Telegraph India, the country’s UCO Bank will be undertaking the rupee trade with Iran as it used to do during the earlier round of sanctions.

Since the UCO Bank has no dealings with the U.S. thus it cannot be sanctioned.

Iran is willing to take some of its export payments in rupee but prefers the euro as a mode of payment. Earlier, too, India had used banks in Europe and Turkey for such transfers.

“The percentage of crude paid for in rupee will be kept at around 30 percent so that Iran can use that to buy Indian goods which it traditionally imports,” Indian officials said.

India had earlier been given the option to use Turkey’s Halkbank, Europaeisch-Iranische Handelsbank of Germany and the Italian central bank to pay up their dues.

Earlier this month, Iranian Foreign Minister Mohammad Javad Zarif and his Indian counterpart Sushma Swaraj held talks in New Delhi on various issues including Rial-Rupee trade to keep the bilateral trade between the two countries after the U.S. imposes new sanctions on Iran.

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