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Iran defaults on rice payments to India-traders

By Reuters

Iranian buyers have defaulted on payments for about 200,000 tonnes of rice from their top supplier India, exporters and rice millers said on Tuesday, a sign of the mounting pressure on Tehran from a new wave of Western sanctions.

The default prompted the head of the All India Rice Exporters' Association to call on members to stop rice exports to Iran based on credit, which would be a fresh blow to a country where imports of staple foods are already being hampered by sanctions.

"It is a serious issue and we do not rule out further payment defaults by Iran," said Vijay Setia, the association's president.

Indian sources said the Iranian buyers had defaulted on payments worth about $144 m  (Dh528.96m) for rice shipments under long-term supply deals. Iran shipped the cargoes from Indian ports in October and November. Most Indian rice exporters allow 90 days credit.

Iran relies on imports for about 45 pct of its annual rice consumption of 2.9 million tonnes, according to US Dept. of Agriculture data.

In other supply disruptions, five deliveries of grain to Iran were diverted to new destinations because payments were held up, ship tracking data showed last week. Other cargoes are sitting offshore Iran because of difficulty with payments.

Under a tightening grip of sanctions, the country of 74 million people is finding it increasingly difficult to repatriate the hard currency from its crude oil exports, its major foreign currency earner, that it needs to pay for shipments of food and other imports.

A sharp drop in the value of the rial is adding to Iran's import costs and the financial sanctions make it difficult for traders in the country to channel import payments through unofficial routes involving middlemen based in Dubai.

India is Iran's top rice supplier, accounting for some 70 percent of its annual requirement of 1-1.2 million tonnes of the grain, mainly the aromatic variety called Basmati.

Traders and officials in Iran could not be immediately reached to comment.

The United States slapped fresh sanctions on Tehran from the start of this year, targeting financial institutions that deal with the central bank, hoping to stem oil revenues and persuade Iran to abandon a suspected nuclear weapons programme.

U.S. President Barack Obama tightened those sanctions on Sunday, again targeting Iran's central bank and giving U.S. banks new powers to freeze assets linked to Tehran.

The European Union has agreed to ban Iranian oil imports, a measure expected to take full effect within six months.