Exclusive: Iran defaults on rice payments to India

NEW DELHI (Reuters) - Iranian buyers have defaulted on payment for about 200,000 tonnes of rice from their top supplier India, exporters and rice millers said on Tuesday, as trade between the two countries comes under mounting pressure from a new wave of Western sanctions against Tehran.

While a sharply weakening rial has made forward purchases costlier, financial sanctions are making it difficult for Iranian traders to continue using an unofficial route involving middlemen based in Dubai to keep paying Indian suppliers.

The defaults, totaling about $144 million, were for shipments under term deals in October and November free-on-board Indian ports, Indian traders said. Most Indian rice exporters allow 90 days credit.

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.

"It is a serious issue and we do not rule out further payment defaults by Iran," said Vijay Setia, president of the All India Rice Exporters' Association. "We have requested the government to step in."

Setia said India should not send any more rice to Iran on credit, adding suppliers such as those in Thailand, Vietnam and Pakistan had already stopped doing so.

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 program.

The European Union followed with a ban on Iranian oil this week that is expected to take full effect within six months.
Source:Yahoo