India in touch with EU over alternative payment mechanism for Iran oil imports

As the US sanctions on import of Iranian crude oil loom large, India is engaged with the European Union for an alternative channel for making payments to Tehran for buying petroleum products, sources said Wednesday.

They said the EU has been been telling India that it was in the process of coming out with a payment mechanism as using US dollars for oil transaction will be restricted post November 4 when the US sanctions come into force.

So far, the 28-nation bloc has not put forward a concrete proposal for making payments to Iran for buying of oil.

India is in touch with both Iran and the US on the complex issue.

In May, the Trump administration had pulled out of the Iran nuclear deal and brought back economic sanctions against Tehran.

The US has told India and other countries to cut oil imports from the Gulf nation to "zero" by November 4 or face sanctions. India is yet to take a call on complying with the US sanctions on Iran.

However, India has been apprising the US about its energy requirement to fuel its economy as well as the importance of Iranian oil.

Iran is India's third largest oil supplier after Iraq and Saudi Arabia. The US' sanctions on import of Iranian petroleum products will be effective from November 4.

India has also been hoping that the US will give it some relief from the sanctions.

Earlier, India was looking at the possibility of falling back on the rupee-rial arrangement for importing oil from Iran in the wake of US sanctions.

The rupee-rial arrangement was used to buy oil from Iran before sanctions were lifted against it three years ago.

Under the mechanism, India used to pay in euros to clear 55 per cent of its dues through Ankara-based Halk bank. The remaining 45 per cent payment was remitted in rupees in accounts Iranian oil companies had with the UCO Bank.