India is likely to resume taking oil exports from Iran despite the US attempt to entirely drive Iranian crude shipments from the world oil market, sources close to the ruling Bharatiya Janata Party (BJP) claim, Indian media outlet ThePrint reported on May 28.

The Modi government, re-elected with a bigger mandate in the country’s parliamentary elections held in April and May, is to immediately initiate talks with Iran to discuss steps that will allow it to resume the oil imports, the sources were quoted as saying by the New Delhi-based publication. In recent years, India has been the second biggest importer of Iranian oil.

“The government is not keen on this [total US ban that started four weeks ago]. It is keen to resume imports, though the quantum will be limited,” a senior government official who didn’t wish to be identified was cited as saying.

He added that Iran’s Pasargad Bank, which holds a clearance from Indian authorities allowing it to operate in India and already has operational offices in the country, would be the oil payments processor.

“Payments can be deposited in the Iranian bank and then Iranian authorities can decide how to utilise the money,” the official said, adding: “Some talks [on these matters] were held earlier too but got stalled due to the elections… They will be revived, and this will be one of the first focus areas of the government.”

One item on the agenda is India’s suggestion that it pays for Iranian oil in rupees to help skirt US sanctions, which are sensitive to any use of the US dollar or financial system in business dealings with Iran. But paying in rupees is not alone likely to avoid triggering reprisals from Washington.

Cultural, economic links
There are important cultural links between Iran and India—Lucknow, for instance, is a major centre of Shiite culture and Persian study—and Iran is important economically to India in that it can offer trade routes via which the Indians can export goods to Afghanistan and Central Asia. Alternative routes via Pakistan are not viable given the often fraught relations between New Delhi and Islamabad.

Iranian Foreign Minister Mohammad Javad Zarif met his Indian counterpart in India last week. Zarif is also busy trying to persuade the Chinese, the number one importers of Iranian oil, not to heed Washington’s demand that countries do not purchases of Iranian oil.

It is thought that Beijing’s decision on this matter may get tied up in the bargaining between China and the US on how to avoid an all-out trade war. Either way, China has made it clear so far that it does not look kindly on the US demand that it should bow to its long-range, unilateral sanctions. Meanwhile, Iranian efforts to export as much oil as possible through hidden grey market means continue.

Shipping route
Separately, a secondary shipping route connecting the western coast of India and Iran has been established with the arrival of a cargo ship, Iranian official news agency IRNA has reported.

The route links the seaport of Kandla in India’s northwestern Gujarat state with Iran’s Qeshm island in the southern Persian Gulf.

Work is proceeding on creating the International North South Transport Corridor (INSTC), a 7,200-kilometre, multimodal project which will see India connected to northern Europe via a corridor running through Iran, Azerbaijan and Russia. The direct sea routes between western India and Iran are obviously crucial to its chances of success.

Qeshm Island’s Kaveh International Port appears to be acting as a secondary port to Iran’s only oceanic port, Chabahar, which India has a long-term contract with Iran to develop. The development of Chabahar, however, is even exempted from US sanctions given its potential importance to giving Afghanistan an economic lift via a trade route running through Iran. Qeshm enjoys no such exemption.

The first ship to dock at Qeshm Island port was the Neshat, a 172-metre-long, 26-metre-wide vessel. It carried 13,000 tonnes of industrial goods from India.

Qeshm is the location of one of Iran’s longest running free trade zones (FTZ). Iran has several non-taxed trade zones along its periphery.