TEHRAN – Indian buyers have paid more than $4.2 billion of their oil debts to Iran by august 26, the National Iranian Oil Company’s director for international affairs announced here on Sunday.

IRNA quoted Seyyed Mohsen Qamsari as saying that, “the two countries have resolved the payment problem and that the oil export has never been halted.”

Iranian Deputy Oil Minister Ahmad Qalebani said on August 15 that the Indian buyers’ debts amount to $4.8 billion.

India, Asia’s third-largest economy and Iran’s second-largest oil buyer after China, racked up the debt after the Reserve Bank of India scrapped a clearing house system last December. 

India imports about 20 percent of its crude oil needs from Iran. Indian refineries have also been designed in a way to refine Iranian heavy crude oil.

New Delhi earlier this month paid off 40 percent of its debt to Iran for oil transferred on credit during the first part of the year. India imported about 12 million barrels of oil per month from Iran on credit, racking up roughly $5 billion in debt to Tehran.

Indiatimes reported on August 23 the the Indian government is mulling a new arrangement for trade with Iran to ensure its exporters receive payments on time and the payment obligations are reduced to a minimum.

India will set up a rupee account to make payment to exporters for goods sold to Iran and those importing goods from Iran will pay into this account, creating a mechanism where only the net amount will need to be paid to Iran. This will substantially reduce the payments that need to be made to Iran.

The details of the arrangement, a kind of barter to the extent possible, are being worked out by the ministries of finance and commerce along with the Reserve Bank of India (RBI).

 

The netting arrangement will initially be limited to non-oil trade, but could be extended to cover crude imports from Iran as well.

India imported $7.8 billion worth of goods from Iran in the April to December 2010 period, of which oil imports stood at $6.65 billion.

Its exports to Iran during the period stood at $2 billion, which is much lower than its total imports. However, the figure is comparable to non-oil imports worth $1.2 billion from Iran.