Al-Monitor | Hamed A. Kermani: Earlier this month, Iranian and Indian officials finally reached an agreement on how India will pay for its oil imports from Iran. The agreement was finalized during Iranian Foreign Minister Mohammad Javad Zarif's visit to New Delhi on Jan. 7-10, in which he headed a high-ranking economic and political delegation. The accord stipulates that Iran’s revenues from oil exports to India will be deposited in a rupee account in the state-owned UCO Bank. The funds will be exempted from hefty withholding taxes and can be used to purchase goods from the Indian market, paying for diplomatic missions, investing in the stock market or any other related aim that Iran desires. It was also agreed that Iran’s Bank Pasargad will open a branch in New Delhi and that Tehran will be able to transfer its export revenues to the bank as well.

The landmark agreement has several important implications.

Unlike the previous round of US sanctions on Iran, the current accord between Tehran and New Delhi does not include a method to settle payments in a convertible currency, namely the euro. Prior to Iran signing the nuclear deal, India had agreed to pay for 45% of Iranian oil in rupees and the rest in euros. Back then, Iran had envisaged escape routes through third party banks and institutions, especially in Turkey, to repatriate its oil export proceeds. But due to European Union sanctions imposed in early 2013, the Turkish route was promptly closed, leading Iran to keep its earnings in Indian accounts. Those proceeds were only repatriated following the signing of the Joint Comprehensive Plan of Action in 2015.

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