Exclusive: Indian merchants almost halt exports to Iran as its rupee reserves plummet – officials
MUMBAI / DUBAI (Reuters) – Indian traders have almost entirely stopped signing new export contracts with Iranian buyers for raw materials such as rice, sugar and tea, due to cautiousness over the cutback reserves of Tehran rupees with Indian banks, six industry officials told Reuters.
“Exporters are avoiding dealing with Iran because payments are delayed by several months,” said a Mumbai-based dealer with a global trading house.
Iranian rupee reserves in UCO and IDBI Bank in India, the two lenders authorized to facilitate the rupee trade, have run out significantly and exporters are unsure whether they would be paid on time for new shipments, the dealer.
Under US sanctions, Tehran is unable to use US dollars to negotiate oil sales.
Iran previously had an agreement to sell oil to India in exchange for rupees, which it used to import essentials, including agricultural products, but New Delhi stopped buying oil from Tehran in May. 2019 after the expiration of a waiver from US sanctions.
Tehran continued to use its rupees to buy goods from India, but after 22 months of no crude sales, Iranian rupee reserves plummeted, said the sources, who asked not to be named. , citing business confidentiality.
Iran’s reserves have shrunk dramatically and “will likely end soon because trade has stopped,” a senior IDBI Bank official said.
The Islamic Republic mainly bought basmati rice, tea, sugar, soy flour and medicine from India.
“Rice exporters are concerned about the current payment mechanism,” said Vijay Setia, rice exporter and former chairman of the Rice Exporters Association of India (AIREA).
“There was too much delay in payments for last year’s shipments. The exporters received the payments six months after the shipments, ”Setia said.
In the first quarter of 2020, Iran imported nearly 700,000 tonnes of basmati rice from India, but during the same period this year shipments would be “very negligible,” Setia said.
Iran was India’s biggest buyer of basmati rice and sugar last year. Iran meets more than a third of its demand for sugar and rice through imports, traders estimate.
Iran’s Ministry of Commerce and the Central Bank of Iran declined to comment on the matter.
PAYMENTS AFFECTED BY SANCTIONS
“We are in talks with the Indian government and Indian traders to resolve these payment issues and I believe this will be resolved soon,” said a senior Iranian official, who asked not to be named due to the sensitivity of the question.
“The delay in payments is due to US sanctions against the Iranian financial system which made these payments very difficult,” he said.
As rupee reserves have run out and dollar trading is not allowed, sugar exporters are exploring options to trade in euros, said Rahil Shaikh, managing director of MEIR Commodities India.
Sugar exporters are focusing on other destinations like Indonesia and Sri Lanka, as Iran is unlikely to buy significant amounts this year, Shaikh said.
India’s overall exports to Tehran fell 42% in 2020 from a year ago to $ 2.2 billion, the lowest in more than a decade, an Indian ministry official said. of Commerce and Industry.
The fall continues into 2021, and in January of this year, exports fell by more than half from a year ago to $ 100.20 million, the official said.
India’s Ministry of Trade and Industry did not immediately respond to a request for comment.
Trading houses and exporters were hoping that new US President Joe Biden could reverse sanctions imposed by his predecessor Donald Trump on the oil-rich country.
“Exports would rebound even if the Biden administration granted some concessions to Iran, such as allowing oil trade in rupees,” said a Mumbai-based trader with a global trading company.
Report by Rajendra Jadhav, Nupur Anand in MUMBAI and Parisa Hafezi in DUBAI; Additional reports from Aftab Ahmed; Editing by Euan Rocha, Sanjeev Miglani, William Maclean