India pays for Iranian oil in Chinese yuan under US sanctions waiver

NEW DELHI: Indian refiners are settling payments for rare cargoes of Iranian oil purchased under a temporary US sanctions waiver using Chinese yuan through Mumbai-based ICICI Bank, four sources with knowledge of the matter said.

Last month, Washington unveiled 30-day waivers on US sanctions for the purchase of Russian and Iranian oil at sea in an attempt to ease prices that were driven up by the US-Israeli war on Iran. US Treasury Secretary Scott Bessent said the US would not renew the waivers, with the exemption on Iranian oil set to lapse on Sunday. Difficulties in arranging payments for such cargoes, given longstanding sanctions on Tehran, have deterred some buyers of Iranian crude under the waiver, traders said.

Earlier this month, state-run Indian Oil Corp (IOC), India’s largest refiner, bought 2 million barrels of Iranian oil onboard the very large crude carrier “Jaya”, in the country’s first purchase of Iranian crude in seven years, Reuters reported. The cargo is worth roughly $200 million.India has also allowed four vessels carrying Iranian oil to berth for privately run Reliance Industries, sources said. A vessel, the “MT Felicity”, has discharged so far, according to LSEG data and a shipping source.

Both refiners are settling trades through ICICI Bank, which is routing funds in Chinese yuan via its Shanghai branch to seller accounts in yuan. The identity of the sellers could not be determined. ICICI, IOC, Reliance, and India’s foreign ministry did not respond to requests for comment.Details of how the cargoes are being paid for had not previously been reported.

Payment arrangement

IOC paid about 95% of the cargo’s value against the supplier’s notice of readiness, which indicates the loaded tanker had entered Indian waters, two of the sources said. One source said this was an unusual arrangement.

Typically, Indian state-owned refiners settle payments upon delivery or discharge for oil from countries sanctioned by Western nations. India has been among the top buyers of Russian oil since Moscow’s 2022 invasion of Ukraine led to widespread Western sanctions. Indian refiners have also used China’s currency to settle some Russian oil purchases.IOC does not plan to make further Iranian oil purchases, one source said.

Until the US waiver, India had shunned Iranian oil purchases since 2019 under pressure from American sanctions. Chinese independent refiners, known as teapots, have been the main buyers of Iranian oil exports since then.