New Delhi: Despite sanctions from the United States, Iran has still been able to hit a sweet spot. The Middle Eastern country has used its accumulated cash from trading oil to purchase sugar from India. At present, Iran has been barred from the global financial system in the wake of the sanctions, including using US dollars to transact its oil sales.
Iran has been finding it difficult to spend the rupees it has earned from oil sales to India that are accumulating in the banks of the South Asian country. Iran can just use those rupees to purchase Indian goods, mostly items the country cannot generate enough of domestically.
Sugar stockpiles stacking up in India
After a bumper crop, sugar stockpiles in the country are stacking up. In a deal to alleviate each other’s troubles, Iran’s state buyer, Government Trading Corporation, will buy 1,50,000 tonnes of raw sugar from mills in India for delivery in March-April, using its rupees from escrow accounts held at UCO Bank to pay for the goods.
The move becomes India’s first sugar sales to Tehran in at least five years. Usually, Iran buys sugar from Brazil, the biggest producer and exporter of sugar in the world. This payment mechanism will enable India, which imports nearly 80 percent of its crude, to meet the terms of the condition that bars direct fund transfers to Iran for a US waiver from sanctions.
It also opens an outlet for India’s swelling sugar reserves as local production exceeds demand for a second consecutive year.
Last year, India imported crude oil worth US$ 12.6 billion from Iran, as goods including basmati rice, tea and oilseed meal were sold only for only US$ 2.9 billion, as per India’s Directorate General of Commercial Intelligence and Statistics.