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Iran has agreed to take payments for oil it sells to India entirely in rupees after US and western sanctions blocked all other payment routes.
India has been, since July 2011, paying in euros to clear 55% of its purchases of Iranian oil through Ankara- based Halkbank. The remaining 45% due amount was remitted in rupees in accounts Iranian oil company opened in Kolkata-based Uco Bank.
Payments in euro through Turkey ceased from February 6 this year but the rupee payments for 45% of the purchases continued through Uco Bank, government sources said.
Iran explored taking 55% payments in Russian Rouble and other currencies but the payment routes could not be finalised due sanctions against the Persian Gulf nation.
Sources said Iran has now agreed to take all of their payment in Indian rupees.
As the euro route was blocked and Iran did not indicate an alternate mode of taking payment for 55% of the oil it sold to Indian refiners, over $1.5 billion in dues got accumulated.
Tehran has now agreed to take this overdue amount in rupees, they said, adding that the entire overdue amount will be cleared within a month.
India, which last month won another 180-day waiver from the US sanctions after it cut crude oil imports from Iran by over 27%, has not bought a single barrel of oil from the Persian Gulf nation since April as insurance firms refused to provide cover to refiners processing Iranian oil.
Imports will resume shortly after the insurance issue is fixed, sources said.
India had in 2012-13 imported 13.14 million tonnes of crude oil from Iran, down from 18.11 million tonnes of 2011-12. Iran was till 2010-11 India's second largest supplier after Saudi Arabia but has since slipped to the sixth place.
In 2012-13, Saudi Arabia was India's largest oil supplier selling 36.62 million tonnes of oil, followed by Iraq at 25.05 million tonnes, Venezuela 21.80 million tonnes, Kuwait 19 million tonnes and UAE 14.71 million tonnes.
Sources said this fiscal imports from Iran may just be around 10-11 million tonnes.
Iran can use the revenue accumulated in Uco Bank account to purchase "permissible" services and goods, such as food, medicine and basic medical equipment.
Iranians have already accumulated $5-6 billion in the Uco Bank account and ways are being explored to see how Tehran can use that revenue either by increasing import of foodgrains or tools and machinery including cars and tractors.
With US sanctions barring sale of any defence or technology intensive equipment, Iranian imports from India will continue to remain low. Also, New Delhi has not allowed Iranians to invest in its securities or debt.