Indian exporters will be able to receive payments in the restricted rupee currency for sales to Iran within two weeks, the chief of India's top exporters' body said, as New Delhi puts a mechanism in place to maintain trade despite US sanctions.
About USD 3 billion in Iranian import arrears have accumulated since December 2010, M Rafeeque Ahmed said, when a previous payment conduit was closed under pressure from Washington, which is using sanctions to try to stop Tehran's suspected nuclear programme.
Indian oil importers have been paying for around $11 billion a year of crude since the middle of 2011 through Turkey's Halkbank, but this route would have been expensive for Iranian importers given sharp falls in the trial.
India was Tehran's second-biggest crude customer last year after China and Iranian oil accounts for about 12% of its needs.
Most of the Iranian arrears are for imports of iron and steel, chemicals and cereals, machinery and pharmaceuticals, Ahmed said.
Indian rice suppliers have also reported defaults by Iranian buyers and have said they are owed at least USD144 million.
With payments for oil through Halkbank now looking vulnerable to fresh sanctions, India and Iran have agreed to settle 45% of this trade in rupees and boost exports to narrow their trade gap. Oil buyers are waiting for tax issues to be cleared up before they use the mechanism.
Iran's central bank has already deposited with India's UCO bank about USD1 billion which had been used in the Asian Clearing Union (ACU), the longstanding mechanism that ended in 2010.
This will be used to kick off rupee payments to India's exporters -- allowing Tehran a way to use the restricted currency it would otherwise find hard to spend.
India abides by United Nations sanctions on Iran, but has refused to go along with new financial measures imposed by the United States and European Union which aim to punish Iran for its nuclear ambitions.
