The new 2000 Indian rupee banknotes. Photo: Reuters/ Mukesh Gupta
The rupee has gyrated between weakening and strengthening against the US dollar this year. Photo: Reuters/ Mukesh Gupta

The United States’ move to impose sanctions on Iran has cast a shadow over India’s trade with the Persian Gulf nation, which it heavily depends on for oil. The sanctions also have the potential to hit India’s ability to export products to Iran.

India may revive a rupee-rial payment arrangement with Tehran to bail out exporters who could face “the heat of US sanctions”, the Financial Express has reported.

The rupee-rial mechanism was put in place in 2011-12, when up to 45% of India’s purchases of Iranian crude could be done in rupees in exchange for items like rice, wheat and medicines, which were not covered by UN sanctions, the daily said.

Such moves had to be undertaken because sanctions by the previous Obama administration made money transfers difficult.

India’s oil purchases from Iran, worth around US$9 billion, accounted for over 80% of its total imports from the Persian Gulf state in 2017-18.

Meanwhile, Indian exports to Iran – mainly farm commodities such as basmati rice – were worth $2.6 billion in 2017-18.

However, the Modi government does not feel the sanctions will result in a significant dent in India’s exports to Iran.

Commerce Secretary Rita Teaotia noted that when sanctions on Iran were lifted by the Obama administration, there was no great increase in exports from India. So, she does not expect any major shift to happen because of fresh sanctions, Business Line has reported.