Indian rice exporters expect Iran sales credit soon

Iranian rice importers could open letters of credit in Indian rupees to pay for Indian rice this week, the president of the All India Rice Exporters Association said on Wednesday.

India said last week its exporters should be able to receive payments in the restricted rupee currency for sales to Iran to help maintain trade, despite US banking sanctions.

"I think it will be operational this week," Vijay Setia told Reuters on the sidelines of a grains conference in Dubai.

"The trouble that Indians are facing is that most of Iranian trade is indirect through Dubai and it is on the basis of long term 90 to 220 days credit," Setia said.

He said a weakening Iranian currency was making it even more difficult for Iranian buyers to pay for staple food imports.

One Iranian rice importer, who had not moved rice from India in two months because of large exchange rate fluctuations, said rupee payments might help revive trade.

"It is going to happen but it is not yet functional...we are waiting for the people to start with small quantities," Shahrokh Khazaei, executive director of Mohsen Line Trading, said.

Khazaei, whose firm trades around 200,000 tonnes of mostly Indian rice per year, said he had cargoes ready in India but was waiting for more clarity on payments before resuming imports to Iran.

Dubai re-exports around 360,000 tonnes of rice a year and around 90 per cent of that goes to Iran, a UAE agricultural firm official said.

A free market economy and a government food security programme that created large stocks helped Dubai to capture 93 per cent of the world rice re-export market but that share may shrink as sanctions start to bite.

"I think with the trade sanctions we will see more rice going directly from India to Iran," Brian Barriskill, supply chain director at Al Dahra Agricultural Company, said.

"We haven't seen the full impact of it yet but probably around the second quarter of this year we will see how stringent it is," Barriskill said.

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

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