India,Iran resolve oil payment issue despite sanctions

February 8, 2012
Dismissing the possibility of U.S. sanctions impacting India-Iran ties, the two countries have worked out a new mechanism for oil payments, following which Indian energy firms will pay for 45 percent of their crude oil imports from Iran in rupees and rest through barter and semi-barter system.
 
India has reached an agreement with Iran on how to continue paying for its crude oil imports, as US-led sanctions against Iran are tightened.
India will pay 45% into Indian bank accounts opened by Iran and invest in Iranian infrastructure.
 The Indian maneuver shows the sanctions against Iran are proving difficult to enforce because of Asia's reliance on Iranian crude.
 
This mechanism for future payments was arrived at a meeting between officials of the two nations in Tehran in mid-January. India has cleared all oil payment dues till date.
 
"A suitable mechanism has been found out. All the money not paid by India last year has been paid," Iranian envoy to India Syed Mehdi Nabizadeh said.
 
"This was the proposal by India and we accepted it. Both the sides are satisfied," Nabizadeh said. 
 
"We have had several rounds of talks, including in Tehran last week and a mechanism agreeable to both sides has now been reached," Iranian Ambassador was quoted as saying. "One of the banks is United Commercial Bank of India. I cannot disclose names of other banks." 
 
India is keen to use the new mechanism as it fears that the current payment route through Turkish bank may end due to fresh U.S. sanctions. India has been paying for its daily imports of 350,000-400,000 barrels per day from Iran through Turkey's Halkbank since last July. India imports about 350,000-400,000 barrels of oil per day from Iran, about 12 percent of the country's overall crude oil imports.
 
The Iranian envoy said the two countries are looking at mechanisms for payment of the remaining 55 per cent.
 
Iran could increase its imports of goods from India to settle part of the payments, Nabizadeh said. Indian companies are also expected to invest in projects in Iran, such as developing oil and gas fields, extracting iron ore, building roads and railways and purchasing fertilizers. India could also export iron, steel, machinery, equipment, agricultural products like rice, and minerals to Iran that faces international sanctions.
 
Nabizadeh, however, ruled out gold as an option for oil payments. "Gold is not suitable," he said.
 
However, he made it clear that Iran will not offer a discount on crude sales to Indian refiners. "Oil prices are an international issue... The price of oil is based on a formula. It should be equal for all," he said.
 
Last month India categorically stated that it would continue to purchase Iranian oil, which is imperative for the country's energy security. India maintained that it adheres to UN imposed sanctions but not sanctions by individual countries.
 
(Source: agemcies)