India and Iran are reportedly finalizing the steps New Delhi will take to pay for Iranian oil using India's national currency in order to continue transactions in the event that the Islamic Republic is cut-off from SWIFT, the international network used for bank transactions.

India will revive a previous arrangement of making payments via an account in UCO bank in India, which does not have international exposure and is not connected to SWIFT, The Times of India reported. Before the US sanctions, Indian oil payments were divided: 45% of them were made in rupees from the UCO account and 55% were paid in Euros. However, India and Tehran are reportedly working on a new mechanism allowing Iran to take the full amount in India’s national currency. The funds are expected to be used for importing items from India.

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The mechanism would allow India to continue purchasing oil from Iran, even after the current 180-day US grace period on Iran's sale of oil abroad expires and if the Iranian banks are banned from using SWIFT payment systems.

US Special Representative for Iran and Senior Policy Advisor to the Secretary of State Brian Hook told journalists on Sunday that countries which continue to import oil from Iran would set up escrow accounts, which would “deny Iran hard currency and denies Iran any revenue on oil sales,” as the money stays within the importing nation’s account.

“We strongly encourage those nations to ensure that Iran spends that money on humanitarian purchases to benefit the Iranian people,” Hook said, as cited by Times of India. He also added that the US will monitor these accounts in order to ensure that money is not spent on illicit activity.

The European Union is expected to announce a special purpose vehicle (SPV) to assist Iran. However, sources told the Times of India that the European mechanism faced several complications and would only become operational by 2019. India also reportedly won't participate in the EU mechanism so there would be an alternative means of payment in case the SPV attracts the attention of the US.

The latest round of US sanctions on Iran is taking effect on Monday, November 5. The sanctions cover Iran's shipping, financial and energy sectors. As part of the move, the US Department of the Treasury is adding over 700 names to a list of blocked Iranian entities. The first round of renewed US sanctions on Iran entered into effect in August.