NEW DELHI (Reuters) ? Iran has turned to India for wheat supplies as other sellers divert grain cargoes away from the Middle East country because of sanctions-related payments problems that have caused palm oil imports to grind to a halt.
Indian tea was also added on Thursday to a growing list of Iran's food imports that are being disrupted by U.S. and European Union sanctions aimed at forcing Tehran to scrap a suspected nuclear weapons program.
India's Trade Secretary Rahul Khullar said a private Iranian buyer is interested in importing "a very large quantity" of wheat, which the world's second-biggest producer of the crop has in surplus.
Khullar, the most senior official in the ministry, suggested India was considering the sale. India wants to step up exports to Iran in a range of goods to settle part of its oil due to Tehran.
"There are UN sanctions which India honors, those don't cover the export of vast range of products which India can export to Iran," Khullar told reporters.
"If the EU and the U.S. both want to stop exports to that country, please tell me why I should follow suit? Why shouldn't I take up that business opportunity?"
"If Europe and the U.S. believe they wish to sanction exports of a large number of items to that country that is their choice. But for us we shall continue business," the trade secretary said.
In recent days more evidence has emerged showing that Iran is having problems buying rice, cooking oil and other staples for its 74 million population.
U.S. financial sanctions imposed since the beginning of this year and targeted at Iran's central bank are playing havoc with the OPEC producer's ability to buy imports and receive payment for its oil exports, commodities traders said.
Trading sources said on Thursday that Singaporean firms have stopped supplying Iran with Indonesian palm oil on concerns over the country's ability to make payments, a day after traders said Malaysian exporters had taken a similar action.
Indonesia and Malaysia account for 90 percent of the global production of palm oil. Most deals for Indonesian palm oil are conducted in Singapore.
"I can confirm that Singaporean firms have stopped. We don't want to go anywhere near Iran at this moment, it is too risky," said a trader with a listed Singaporean firm that ships Indonesian palm oil cargoes to the Middle East and Iran.
A trading source from Saudi Arabia whose firm runs a 16,000 tonne a year edible oils refinery in Iran said the refining sector was barely operating.
The halt in palm oil supplies comes on top of Iranian payment problems for Indian rice and European grain to Iran.
Iran imports around 4.5 million tonnes of grain a year, including about 3.5 million tonnes of maize, which is mainly used in animal feed.
It relies on imports to meet more than 60 percent of its maize needs, about 45 percent of its rice demand but only 3 percent of its wheat, figures from the U.S. Department of Agriculture showed for 2010-11.
However, wheat could be used by Iran to replace maize as animal feed, which may explain the approach to India, especially after news last week that Ukrainian maize shipments had been cut in half.
India is expected to harvest a record 88.31 million tonnes of wheat in 2012, while government stocks on January 1 stood at 25.7 million tonnes, more than three times the official target for the quarter ending March 31.
Khullar said Indian tea exports to Iran face payment problems as well. India exported more than 15 million kilograms of tea to Iran worth over $50 million, India state-run Tea Board figures show.
That adds to news that Iran had defaulted on rice payments worth $144 million.
"There were just handful, or a clutch of rice payments which are stuck ... more important than the rice payment is the tea payment," Khullar said.
"Private traders are not dumb. They stop exports when the payment system run into trouble. The actual shipments of rice to Iran are much lower than they had been in previous years," Khullar said referring to rice exports.
"There are a handful of guys ... who have actually exported, whose payment settlement has got stuck in transit."
While some Asian buyers have cut crude imports from Iran due to payment issues, the sanctions have prompted a plunge in the rial and raised costs of imports for Tehran. The sanctions have also made it more difficult for Dubai-based middlemen to process payments.
(Additional reporting by Niluksi Koswanage and Yantoultra Ngui in KUALA LUMPUR, Yayat Supriatna and Neil Chatterjee in JAKARTA; Writing by Naveen Thukral; Editing by Neil Fullick)
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