Indian Oil Corporation expects Iran to invest in the expansion of its refinery in Chennai despite US sanctions.

“They (Iran) have said they want to participate and I think they should be able to invest,” IOC chairman Sanjiv Singh told reporters here on Wednesday.

IOC plans to pull down the refinery at Nagapattinam of its subsidiary Chennai Petroleum Corp Ltd that has an annual capacity of a million tonnes and build a new one of nine times capacity in six years. National Iranian Oil Co (NIOC), which holds a 15.4 per cent stake in Chennai Petroleum, is keen to participate in the expansion project.

Iran’s involvement came under cloud following the US sanction on the Islamic nation that forced New Delhi to cut its oil imports from Iran.The IOC chairman’s comments come a few days after India exempted rupee payments to NIOC for crude oil from withholding tax.

The exemption will allow Indian refiners to settle about $1.5 billion of outstanding payments to NIOC in rupees. It is expected the payments could help Iran invest in Indian projects, particularly in the expansion of Chennai Petroleum.

After the US reimposed sanctions against Iran beginning November, India is paying its third-largest crude oil supplier in rupees that are being made into a Uco bank account of the Iranian refiner.

The government has allowed NIOC to use the money it gets in the Uco account to pay for commodities Iran buys from India as well as for direct investment in Indian projects. Naftiran Intertrade, the Swiss subsidiary of NIOC, holds a 15.4 per cent stake in Chennai Petroleum. IOC holds a 51.89 per cent stake.

The expansion was to originally cost Rs 27,460 crore but is now estimated to cost Rs 35,698 crore. Officials said, CPCL plans to achieve financial closure of the refinery expansion in 2019. It also plans to build a petrochemicals plant of about 475,000 tonnes per annum capacity.