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Indian traders wary of export contracts with Iran

Continued US sanctions on Iran are threatening the continuation of trade between India and the southwest Asian nation. Indian merchants have nearly stopped entering into new export contracts with Iranian buyers for commodities like rice, sugar and tea, as Tehran’s rupee reserves with Indian banks are drying up.

“Exporters are avoiding dealing with Iran since payments are getting delayed for months,” according to a Mumbai-based dealer with a global trading house. Iran’s rupee reserves in UCO and IDBI Bank, which are the two lenders authorised to facilitate rupee trade, have depleted alarmingly, since exporters are now worried about receiving timely payments for new shipments. Meanwhile, US sanctions mean that Iran cannot use US dollars for oil sales.

Earlier, Iran had an agreement to sell oil to India in exchange for rupees, which it used to import critical goods including agricultural commodities. But India stopped buying oil from Iran after the US waiver expired in May 2019. The Islamic Republic was mainly importing basmati rice, tea, sugar, soymeal and medicines from India.

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