NEW DELHI, (Reuters) – India export guarantee agency has not stopped giving insurance cover to shipments to Iran and has only tightened criteria as part of a more cautious approach, official sources said on Friday, as western sanctions make trade with Tehran tougher.
The sanctions imposed by the United States and European Union to deter Tehran from pursuing its nuclear programme are playing havoc with Iran’s ability to pay for its imports, leaving global suppliers jittery about doing business with the Islamic republic.
About $3 billion in Iranian arrears in payments to India for imports have accumulated since December 2010 when a previous payment conduit was closed under pressure from Washington. Indian rice suppliers have also reported defaults by Iranian buyers.
“We have been very cautious for the past six months and will try to keep our exposure (to Iran) at the minimal level,” said one source at the Export Credit Guarantee Corporation (ECGC), which covers the risk of Indian exporters selling on credit.
“But we have not halted cover to Iran exports.”
Another ECGC source said insurance cover was being given “on a case by case basis” after the agency tightened the norms for cover of goods destined for Iran.
A third ECGC source said Iran was on the agency’s restricted countries list, along with nations including Yemen and Libya.
“Iran figures in the restricted category because of political reasons,” the third source told Reuters.
Two of the ECGC sources said the agency currently had an exposure of up to six billion rupees ($123 million) in providing insurance cover to Indian exports to Iran.
India is Iran’s second-biggest oil client, buying about $11 billion worth of crude every year. Indian exports to Iran come to about $3 billion and the two sides are exploring ways, including barter, to carry on their trade despite sanctions.
While Indian oil refiners are currently routing their payments to Iran through Turkey’s Halkbank, Indian exporters use Dubai-based middlemen to receive payments. Both channels have appeared vulnerable in the face of new tougher sanctions.
India abides by United Nations sanctions on Iran, but has refused to go along with the new financial measures imposed by the United States and European Union.
In the face of sanctions that make it difficult for Iran to repatriate the funds from its crude oil exports, it has agreed with India to settle 45 percent of their oil trade using the rupee, which is not freely traded on global markets.
Last week, Indian exporters said they should be able to receive payments in rupees for sales to Iran.