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India is looking at the possibility of falling back on the rupee-rial arrangement for importing oil from Iran in the wake of US sanctions on buying oil from the Persian Gulf nation, official sources said on Wednesday.
They said India is expecting the Trump administration to get in touch with it over the issue of imposition of US sanctions on Iran, adding the government will be able to formulate a strategy on oil import from that country following the talks.
"In the next few weeks, we expect to have some engagements on the issue with the US. We cannot pre-judge what the US will be doing," said a source.
India may likely to fall back on the rupee-rial arrangement for importing oil from Iran in case the US forces it to cut procurement of petroleum products from that country, the sources said.
India is also expected to convey to the US the importance of the Chabahar port project considering that it can be a major link for trade with war-ravaged Afghanistan.
The sources said there has been informal indication from the US that the Chabahar port may be kept out of the sanctions regime.
Shipping to Iran and ports in the country are also coming under the US sanctions.
"They understand our reasoning on Chabahar. It (the US sanctions) should be carved out in the context of Afghanistan," said the source.
The US has told India and other countries to cut oil imports from Iran to "zero" by November 4 or face sanctions, making it clear that there would be no waivers to anyone.
The sources said there was no doubt that the US was going to put pressure on India and other countries which import oil from Iran, noting, "the question is what do we see as a national interest and how do we explain our case to the US. That is still to be done."
The rupee-rial that arrangement was used to buy oil from Iran before sanctions were lifted against it three years ago. Under the mechanism, India used to pay in euros to clear 55 per cent of its dues through Ankara-based Halk bank. The remaining 45 per cent payment was remitted in rupees in accounts Iranian oil companies had with the Uco Bank.
The first set of US sanctions on Iran will start from August 6 and second set will begin from November 4. The sources said the US was prepared to work with countries that are reducing their oil imports on a case-to-case basis.
India is an oil dependent country and will act what is in its national interests, they said.
Last week during her visit here, US envoy to the UN Nikki Haley had said that India should snap trade ties with Iran.
According to the sources, External Affairs Minister Sushma Swaraj had not given any assurance to her Iranian counterpart Mohammad Javad Zarif about oil import from Iran when they held talks here in May.
They also said the Petroleum Ministry has not decided on cutting oil import from Iran. Iran is India's third-largest oil supplier after Iraq and Saudi Arabia. Iran supplied 18.4 million tonnes of crude oil between April 2017 and January 2018 (first 10 months of fiscal 2017-18).
