Under the Joint Comprehensive Plan of Action, Iran will have access to its overseas oil revenues, which have long been restricted Iran under U.S. sanctions. This has proven a contentious part of the nuclear deal during the ongoing Congressional review period. Less discussed, though, is how Iran will repatriate those overseas oil revenues.

The case of India is illustrative. Following the passage of Section 1245(d) of the NDAA 2012, foreign banks faced lost access to the U.S. financial market if they knowingly engaged in significant financial transactions with the Central Bank of Iran or a designated Iranian financial institution, including for the sale of Iranian petroleum. Understanding the difficulties Iran’s major oil importers faced in losing an entire market, Congress allowed the Secretary of State to grant exceptions to certain countries that significantly reduced their purchases of Iranian crude oil. As such, India – a major Iranian oil importer – received a significant reduction exception, and its banks were permitted to conduct limited transactions with Iran’s Central Bank and/or designated Iranian financial institutions for the purchase of Iranian petroleum.

Upon passage of Section 504 of the Iran Threat Reduction Act (“TRA”), however, a wrinkle was thrown into this statutory scheme. Section 504 of the TRA required that any funds owed to Iran as a result of bilateral trade between Iran and the country granted a significant reduction exception be credited to an account located in the country. In other words, Iran’s revenues generated from its sale of oil overseas could not be repatriated back to Iran under this scheme. Instead, those funds could be used for one of two purposes: (1) permissible bilateral trade in goods or services between Iran and the country granted the significant reduction exception; or (2) sales of humanitarian goods, including agricultural commodities, food, medicine, or medical devices, from third countries to Iran. Absent utilization of Iran’s oil revenues for one of these two purposes, Iran was restricted in its access to its own funds.

Each of the countries granted a significant reduction exception from the Secretary of State invented their own scheme for realizing the objectives of TRA Section 504. For instance, India deposited 45% of monies owed Iran as a result of its purchase of Iranian petroleum into UCO Bank – a small Indian bank that grew in outsized importance thanks to its receipt of these Iranian oil revenues. The rest of the monies owed to Iran were held by India’s oil refiners, including Essar Oil and MRPL, amongst others.

India is an interesting case, then, because India’s oil refiners will have to come up with the funds to repay Iran in the coming months. Indeed, news from India suggests that the Indian government is involving the Reserve Bank of India (India’s central bank) to help Indian refiners figure out the mechanism for making payments to Iran without causing too much of a financial hassle for the refiners themselves. Considering the substantial sums owed to Iran, this is not surprising: Essar Oil is estimated to owe Iran $3.34 billion, while MRPL is estimated to owe $2.49 billion.

India’s Finance Ministry already sent a delegation to Tehran in late July to discuss implementation of the repayment scheme. Most likely, this involved discussion of what amounts Iran would like to see repatriated, as well as whether Iran would be amenable to scheduling out those payments over an extended period of time. Faced with the prospect of having to send billions of dollars out of country in the near-term, India – as one of Iran’s oil importers with extensive restricted Iranian funds – is having a difficult time figuring out how to effectuate payment to Iran without causing too much disturbance to its own financial stability.

As of yet, India’s plan remains unclear. But India’s oil refiners will be expected to make the first payments if recent news is any indication. Two weeks ago, the Government of India informed India’s oil refiners to prepare to pay $1.4 billion in oil dues. According to this scheme, India’s oil refiners would deposit its payment in dollars into the Reserve Bank of India, which would then transmit the funds through New York and onto the UAE Central Bank, where they would eventually be repatriated to Iran in dirhams.

To help with the scheduling issues, these initial payments would not be effectuated as part of the JCPOA, but rather under the interim Joint Plan of Action. Because the Joint Plan of Action remains the controlling law on the Iran nuclear issue until such time as the JCPOA kicks into effect, Iran will still be owed $700 million in its overseas oil revenues on a monthly basis. Thus, India’s oil refiners will come up with the sums for two of these payments, so as to potentially reduce its later burden once the JCPOA takes effect and Iran’s oil revenues can be repatriated without limitations. (For those wondering why Iran is interested in payment in dirham, the answer is, Iran likely isn’t. But, until the JCPOA takes effect, the provision of U.S. banknotes to Iran remains a sanctionable activity.)

The intensive discussion of the uses for which Iran will direct its newly-accessible overseas oil revenues thus ignores the fundamental issues that will arise in effectuating the transfer from accounts of its oil importers back to Iran. Such transfers will involve significant stress on countries like India that might have planned rather poorly for the day after a nuclear deal and what it would mean for payments due to Iran. Nonetheless, an accurate account of Iran’s uses of these revenues will need to take into consideration the potential difficulties that the parties may run into post- Implementation Day. Failure to do so leaves us with a cabined view of what will really be taking place on the ground.