Iran on Monday called for reactivation of the rupee-rial mechanism for trade with India to work around unilateral sanctions that have impacted Indian oil purchases from the Gulf country.

The advocacy of the rupee-rial mechanism was made by Iran’s secretary of the Supreme National Security Council (SNSC) Ali Shamkhani during his meeting with national security adviser Ajit Doval in Tehran, the Iranian news agency IRNA reported.

“Shamkhani noted that activation of the rial-rupee mechanism is a necessary and important action that would play a pivotal role in advancing shared goals in various economic fields,” it said.

The rupee-rial mechanism was first drawn up in 2012 in the face of UN sanctions on Iran as a result of which payment problems hit bilateral trade. Under this mechanism, payments would be received by Iran in rupee and deposited in Uco Bank. Iran would, in turn, use this money to buy Indian goods.

Once the Iran nuclear deal was signed in 2015, this mechanism was not used much. The decision of former US President Donald Trump to walk out of the nuclear deal and announce unilateral sanctions once again forced India to cut back on oil purchases from Iran. The two countries once again dusted out the rupee-rial mechanism and have been in discussions since but trade volumes are yet to be restored.

According to the Indian embassy in Tehran, India-Iran trade during 2021-22 stood at $1.91 billion, a decrease of 9 per cent from $2.10 billion during 2020-21.

Shamkhani was also of the view that global and regional developments had created a conducive situation to strengthen interactions between Iran and India in the field of energy, transportation and transit, technology, and banking.

Doval in particular, mentioned the impact of the Iran-Saudi deal — brokered by China — on international politics.