While there has been no progress in facilitating India’s reach to the Middle East via Chabahar, Iran, after Russia, has offered to meet India’s energy demand, taking advantage of the US’s distracted state due to the Ukraine situation. The offer comes at a time when global crude oil prices are at multi-year highs, threatening to push inflation, widening trade deficits that New Delhi runs with foreign countries and weakening the rupee against the dollar, and this makes the offer attractive for India.
Iranian ambassador to India Ali Chegeni has offered to relaunch the rupee-rial trade mechanism for the export of oil and gas to India. He added that bilateral trade has the potential to cross $ 30 billion if the two sides can revive the rupee-rial trade.
Before US sanctions, Iran and India ran a barter system wherein Indian oil companies would pay in rupees to local Iranian banks, which in turn used the currency to pay for imports from India. The mechanism led to a proliferation of oil trade between the two countries to the extent that Iran replaced Saudi Arabia as India’s largest oil supplier.
Iran was India’s second-largest oil supplier but New Delhi had to halt imports after the Donald Trump administration backed out of the nuclear deal with Tehran and re-imposed sanctions on Iranian oil. After American sanctions, trade between India and Tehran plunged from $ 17 billion in the financial year 2019, to less than $ 2 billion in April-January of the current fiscal.
“Iran is ready to meet India’s energy security needs by launching rupee-rial trade for export of oil and gas,” Chegeni was quoted as saying in a statement issued by the MVIRDC World Trade Center, here over the weekend.
Chegeni said, “A rupee-rial trade mechanism can help companies from both the countries deal with each other directly and avoid third-party intermediation costs.” The ambassador also proposed to find alternatives ways to revive the Iran-Pakistan-India pipeline project for transporting natural gas to India.
The trade between Iran and New Delhi wasn’t just restricted to oil and gas. Urea, petrochemicals, organic fruits, agro commodities, pharmaceuticals, iron and steel and automobiles, clinkers, cement also form part of bilateral trade. Iran even introduced a paperless, electronic multiple visa issuance system for Indians to promote an exchange of businessmen, tourists and students, the envoy said.
India’s recent decision to import Russian oil at the peak of Western sanctions has invited condemnation while Europe continues to buy Russian natural gas with no timeline in sight for cutbacks.
India’s largest oil refiner and oil marketing company IndianOil signed a contract for 3 million barrels of Russian crude and the second-largest BPCL booked 2 million barrels at heavily discounted rates. Media reports said Russia is offering up to 25% discount to India.