Putting an end to the more than two month oil payment crisis, India on Thursday said it had resumed payment to Iran for the crude oil being purchased after putting in place an alternative system of routing money through a German bank.
“Pending dues of National Iranian Oil Company (NIOC) are now being cleared and as of March 1, 2011, payment of 1.5 billion Euro has been made to the Central Bank of Iran,” Petroleum and Natural Gas Minister, S. Jaipal Reddy informed Lok Sabha in a written reply.
The Reserve Bank of India (RBI) in December stopped use of a long-standing clearing mechanism of Asian Clearing Union (ACU) for payments. After prolonged negotiations, India had last month decided to pay for the Iranian oil using euros through German-based Europisch-Iranische Handelsbank AG (EIH Bank).
“Consequent to the withdrawal of the ACU mechanism by the RBI with effect from December 23, 2010, all payments to Iran for import of crude oil have to be settled in any permitted currency outside the ACU mechanism,” he said. India imports 12 million barrels of crude oil every month from Iran, which is the nation’s second-largest supplier after Saudi Arabia.
After the scrapping of the ACU, Iran, which makes up for over 12 per cent of India’s oil needs, as a gesture of goodwill, continued to supply oil to the Indian oil companies on credit despite the outstanding having run to a staggering $4 billion.
Mr. Reddy said 21.2 million tonnes of crude oil was imported from Iran in 2009-10 fiscal. Mangalore Refinery and Petrochemicals Limited imported 6.9 million tonnes, Essar Oil 5.3 million tonnes, Reliance Industries Limited (RIL) 3.3 million tonnes, Hindustan Petroleum Corporation Limited 3.2 million tonnes and Indian Oil Corporation 2.5 million tonnes. He said during April-September this fiscal, MRPL imported 3.3 million tonnes, Essar 3 million tonnes, HPCL 1.3 million tonnes and IOC 1 million tonnes.
This fiscal, RIL completely stopped using Iranian oil and in first six months 8.9 million tonnes of oil was imported from Iran, Mr. Reddy said.
Officials in the Petroleum Ministry said as per the requirement of the German Central bank, Deutsche Bundesbank (DBB) — which had permitted payment in euros through EIH — each drop of oil bought from U.S.-sanctioned Iran is being certified.
First, the oil companies are certifying the crude oil they bought from Iran and payments that are due. This is being counter-certified by the Petroleum Ministry. Furthermore, State Bank of India — the banker which is to route the payments — is also affixing its seal on the transactions.
Though the ACU was scrapped in December, payments were due for oil bought since September, as Iran sells oil on a 30 to 90 day credit period. Sources said regulations endorsed by the EU in October required deals involving Iran and the euro to be accompanied by a certificate outlining payment details for each and every transaction.
United Nations’ sanctions do not forbid buying Iranian oil and recently the European Central Bank (ECB) asked the RBI to provide certificates that the euro is being used to import products that are not on the U.S. sanctions list.