As U.S. sanctions deadlines expire this month, exporters urge government to revive oil-rice barter trade mechanism with Iran

The government’s acknowledgement on Saturday (April 4, 2026) that it is procuring oil and LNG from Iran after a gap of seven years has sparked hope for Indian traders that it may consider restoring trade with Iran and its interest in the Chabahar port, even as U.S. sanction deadlines loom again in April. The U.S.’s temporary sanctions waiver for Russian oil specifically for India expires on Sunday (April 5), while another general waiver for all countries will expire on April 11. In addition, the U.S. waiver for Iranian oil will expire on April 19, and its six-month waiver for India’s stake in Chabahar port ends on April 26.

On Friday (April 3), the Ministry of External Affairs said it “remains engaged” with the U.S. and all parties on the issue of Chabahar, while officials expressed hope that Washington would consider extending the waivers on oil, given that the war in West Asia continues, with no end in sight.

However, there’s no clarity on whether the government will reject U.S. President Trump’s demands if the U.S. decides to re-impose sanctions.

Iran’s continued restrictions on the Hormuz Strait are a big concern, say exporters, given that more than 80% of India’s Basmati exports are destined for West Asian countries and a large number of export consignments are currently stranded in the Strait, stuck in transit at ports or on the high seas, leading to heavy financial losses for them.

In a letter to Commerce and Industry Minister Piyush Goyal, the Punjab Rice Millers Exporters Association urged the government to arrange a barter agreement with Iran, exchanging Iranian crude oil for Indian rice shipments. “This one significant step would ease India’s oil crisis and revive our traditional trade with Iran,” association director Ashok Sethi told The Hindu, adding that the exporters are urging the government to make use of the “Rupee payment mechanism”, a corpus fund managed through UCO Bank set up in 2012 for commodities trade. He added that this would help farmers clear the stocks of Basmati rice from the previous crop season ahead of the new kharif sowing season from May. 

If activated, the mechanism would also help India pay for crude oil from Iran, although at present Indian refiners are not taking very large quantities of it, given the high prices, low availability and the need to recalibrate refineries for it.

In 2019, the Modi government ended imports of Iranian and Venezuelan oil due to alleged U.S. pressure, and began to reduce imports of Russian oil in November 2025 because of the U.S.’s 25% penalty tariff, which was removed in February 2026. After Mr. Trump threatened another 25% tariff for any trade with Iran, MEA officials pointed out that these were at minimal levels of $1.6 billion in 2024, dropping from about $15.7 billion in 2014. The government also pulled out all staff and prepaid its investment commitment of $120 million to Iran in November 2025 for the Chabahar port development project, indicating it was prepared to end the project due to the U.S. sanctions threat.

“On this particular issue (Chabahar port), the sanctions waiver that was given to us is valid till April 26, 2026. The Government of India remains engaged with all concerned in order to address the implications of these developments,” MEA spokesperson Randhir Jaiswal said at a briefing.

Meanwhile, the Ministry of Petroleum and Natural Gas has stressed that decisions on buying oil were commercially driven, denying the U.S. claims that it “allowed” India to buy Russian oil by issuing the waivers so as to keep oil prices low. Despite that, the price of oil has remained high, at more than $110 per barrel.

“Amid Middle East supply disruptions, Indian refiners have secured their crude oil requirements, including from Iran; and there is no payment hurdle for Iranian crude imports as per some rumours being circulated,” the PNG ministry said on Saturday (April 4), adding that India now imports crude oil from over 40 countries. All eyes are now on whether the imports will continue, even if the U.S. snaps back any of its sanctions in April.

(With inputs from Saptparno Ghosh)