NEW DELHI, March 28 (UPI) -- Any decision from New Delhi to purchase crude oil from Iran is likely to weaken an already poor performing rupee, a currency specialist said.
New Delhi is expecting to move toward the rupee for Iranian crude oil once European Union sanctions on Iran take effect in July, reports Bloomberg News. Tehran, however, had said it would prefer at least partial payments in yen because of currency conversions.
India has struggled to pay for Iranian crude oil since the Reserve Bank of India opted in December 2010 to stop trading in euros and U.S. dollars. Rupees can't be converted easily and Bloomberg said the Indian currency is among the worst among Asian currencies.
Jonathan Cavenagh, a currency strategist at Westpac Banking Corp, told Bloomberg from Singapore that New Delhi's crude oil problems are "indeed negative for the rupee."
New Delhi relies on imports for as much as 80 percent of its oil needs and counts on Iran as its No. 2 supplier. The government has called for a gradual move away from Iranian crude, however, because of sanctions pressure on Tehran.
The U.S. law targeting Iran's central bank applies to a country that isn't making significant reductions in its crude oil purchases from Iran by the second quarter of 2012.
If New Delhi doesn't cut back, the White House might target New Delhi with sanctions because of its energy ties to Iran.