India's soymeal sales to Iran are set to spike as the oil producer uses the rupees it receives for its crude exports to cover its animal feed demand amid U.S. sanctions that have crimped the country's ability to import necessities.
Iran has agreed to sell crude oil to India, the world's third-largest oil consumer, in exchange for rupees after sanctions imposed by the United States blocked its access to the global financial system.
India's soymeal exports to Iran could jump to 450,000 tonnes during the 2018/19 fiscal year ending in March, up from just 22,910 tonnes during the previous fiscal year, industry body Solvent Extractors' Association (SEA) said.
Exports could rise to 500,000 tonnes during the next fiscal year if the sanctions remain, SEA said.
India started paying Iran for oil imports in rupees after receiving a six-month waiver from the sanctions that started in November.
India wants to continue buying oil from Iran since it offers free shipping and an extended credit period, while Iran will use the rupee funds to mostly pay for Indian exports.
During the previous U.S. sanctions, India settled 45 percent of its Iranian oil payments in rupees and the remainder in euros. But this time New Delhi wanted to make all payments in rupees to reduce its trade deficit with Iran.
Local soybean prices have jumped 10% in just three weeks as oil mills started procuring the oilseed to fulfill the export orders for Iran.