* India aims to boost exports of wheat, industrial goods,
projects to Iran
* 5 private Iranian banks identified to open account in UCO
(Adds details, quotes)
By Matthias Williams and Nidhi Verma
NEW DELHI, Feb 2 India will send a
delegation to Iran this month to explore boosting exports to
smooth use of the restricted rupee currency, which the two sides
have agreed to use for 45 percent of New Delhi's $11 billion a
year oil bill, sources told Reuters.
India is currently paying Iran for the oil through Turkey's
Halkbank after a previous mechanism was closed 13
months ago, but fears that route may also succumb to
The United States slapped fresh sanctions on Tehran from the
start of this year, targeting financial institutions that deal
with the central bank, hoping to stem oil revenues and persuade
Iran to abandon a suspected nuclear weapons programme.
The European Union followed with a ban on Iranian oil this
week that is expected to take full effect within six months.
India is Iran's second-biggest oil client after China but
its own exports to the Islamic nation are worth only about $2.7
billion according to latest figures from the commerce ministry.
The two sides have resorted to the rupee as a possible means
of payment for 45 percent of oil dues, a government source said,
but this would give Iran large amounts of a currency which is
difficult to use for international trade.
"India is looking at project exports and services on top of
current exports to fix the trade imbalance as the rupee is not
fully convertible," said the source, adding the federal trade
ministry is working out the details.
The Indian team would visit Tehran at the end of
India could also step up exports in a range of goods,
including farm products such as wheat, industrial goods and gems
and jewellery, a senior government official said, who did not
wish to be identified because of the sensitivity of the subject.
"You have to devise a mechanism with which you can pay for
the import of oil and avoid attracting sanctions," the official
said. The two sides are looking for a stable payment mechanism
avoiding the involvement of financial institutions which have
interests in Europe or the United States.
He added that a a business delegation would go to
Iran, taking potential exporters.
"Traditional exports on the food category, which have always
gone to Iran, have been orthodox tea and basmati rice. So those
will continue. We are now told that there is also a demand for
wheat and other items," the government official added.
Wheat sales from India could benefit both sides, as
Iran now faces problems with imports under the new European
About 400,000 tonnes of grain has been held up on at least
10 ships outside Iranian ports for as long as three weeks, trade
sources said. [ID nL5E8CU2YB]
For India, the world's second-biggest producer of wheat,
exporting the grain to Iran could benefit local farmers and
traders, who have struggled to sell output overseas as
international prices have been too low.
But the government official said it would be for individual
traders to strike deals. Payment details may also need
"It's certainly a great opportunity to export wheat to Iran
but the need of the hour is to find out a suitable payment
mechanism," said D.P. Singh, president of the All India Grain
The rupee route is currently a backstop, one refiner said.
"It is a fact that central bank of Iran has opened
an account with UCO Bank but we are not using that. As of now
all our payments are going through Turkey. UCO Bank route is our
Plan B," said an executive at one of the state-run refiners.
Five Iranian private banks -- Bank Parsian, Pasargad, Saman,
Sarmaye and Karafarin Bank which are free from the sanctions
imposed on all of Iran's state-owned banks -- will
also open account in UCO Bank, the government source said.
"Indian refiners will deposit money in Iran's central bank
account in UCO bank, which will then transfer the money from the
central bank's account to the account of the five private banks
for further releasing the money to Indian exporters," the
government source said.
India's foreign secretary will travel to the United States
from Feb. 6-8 for regular bilateral talks where the issue of
payments for Iranian oil could come up, a foreign ministry
(Reporting by Matthias Williams and Nidhi Verma; additional
reporting by Ratnajyoti Dutta and Satarupa Bhattacharjya;
editing by Krittivas Mukherjee and Jo Winterbottom)