With Looming US Sanctions, India And Iran Quietly Work On Alternative Payment Mechanism

Despite US have asked India to cut oil imports from Iran to zero by November during the 2+2 dialogue yesterday (6 September), New Delhi and Tehran were working out a new payment mechanism reports The Times of India.

A tie up of India’s UCO Bank and Iran’s Bank Pasargad had been proposed. The Iranian bank was recently granted permission to open a branch in the country. This tie-up will likely be put to use for payment of oil purchased from Iran while export of Indian products such as rice and engineering goods set off.

The two countries had worked out a similar mechanism when financial sanctions were imposed on Iran by the Barack Obama administration. Iran is showing interest in buying railway and engineering equipment from India.

India is likely to reduce the import, though it may not succumb to the US demand for cutting down imports to zero. The US, after withdrawing from the nuclear deal signed by Obama, is set to impose sanctions on Iran in November. The sanctions is likely to severely impact its oil industry, port operators, shipping sector and petroleum-related transactions.

The proposed payment mechanism is likely to bring down prices of crude oil says reports.