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| Iran will cut oil supplies to India if $9b in arrears not paid |
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TEHRAN (Agencies) - Iran has threatened to halt crude oil supplies to India starting in August if New Delhi does not pay Iran 9 billion dollars for oil imports, which is now seven months in arrears.
Iran is the second largest crude supplier to the country after Saudi Arabia and accounts for about 12% of India's annual oil needs, Indian sources said.
Iran is supplying some 400,000 barrels per day of crude oil to India on credit since late December last year when the Reserve Bank of India scrapped a long-standing mechanism to pay for import from Persian Gulf nation using a clearing house system run by regional central banks.
“The situation is grave. We need to find an alternative to the scrapped payment mechanism,” an Indian official said.
Outstanding payments have now topped $9 billion, sending finance ministry to scramble for an alternative mechanism.
The urgency stems from the fact that Iran is the second only to Saudi Arabia as an oil supplier to India, while India is Iran’s second-biggest crude buyer after China, accounting for about 20 per cent of its exports. Iran supplies 12 per cent of total oil needs of India.
As an alternative to Asian Clearing Union (ACU), India tried routing payments through countries like the UAE, Russia and Turkey. All of them were willing to do small payments, running into few million dollars, but said no to routing nearly $13 billion that India pays for Iranian crude annually.
India finance ministry officials said the government was yet to find an alternative arrangement for making the payments for oil imports from Iran.
"The option of making payments in rupee is not acceptable to Iran with the existing restrictions," a finance ministry official said. "We are looking at other possible options.
While some Indian sources announced that National Iranian Oil Company has sent letters to Mangalore Refinery & Petrochemicals and Essar Oil saying it would be forced to halt supplies from next month if the two countries fail to evolve a mechanism for future payments, but a spokeswoman for Indian Oil Corporation, the country's biggest refiner, said her company has not received any letter from the Iranian state oil firm.
A senior official with the Indian ministry of petroleum & natural gas also denied any communication of such a nature from Iran.
"The situation is grim, but Iran has not threatened to stop crude supply from August," the official said. The two countries have been trying to resolve an impasse over crude payments since December when the Reserve Bank of India clamped down on a regional clearinghouse, the Asian Clearing Union, which involved the Iranian central bank. The Indian companies used the clearinghouse as the main conduit to pay for oil consignments from Iran.
"Besides Mangalore Refinery & Petrochemicals and Essar Oil, Hindustan Petroleum Corporation is the other main importer of Iranian crude. India imports 21 million tons (mt) of crude from Iran every year.
In April, Hindustan Petroleum had said that it has finalised a contract with Iran for supply of 3.5mt of crude for 2011-12.
- India can’t afford to stop import of Iran oil
Mangalore Refinery & Petrochemicals, a subsidiary of ONGC, is the biggest consumer of Iranian crude in the country. The company, which has a 12mt capacity refinery on the south-west coast, depends on Iranian crude for more than half of its annual processing capacity. "We can't afford to stop import of Iranian crude," a senior company executive said.
In 2008-09, Mangalore Refinery & Petrochemicals imported 8mt of crude from Iran. But the following year, it was reduced to 1mt.
Essar Oil, a private firm, buys about 5mt of crude from Iran annually. An Essar spokesman refused comment for this story.
Indian Oil Corporation and Bharat Petroleum Corporation import less than 1mt of crude from Iran. Senior government officials say purchase of crude oil from Iran is permitted under the United Nations sanctions but the US has been putting pressure on countries to stop oil transactions with Iran. "We had been able to clear some backlog though Euro payment, but due to the US pressure that system was abandoned by the host bank," one official said.
In February, payment for Iranian crude import was routed through German bank EIH.
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| Last Updated on 02 July 2011 17:43 |