Sourcing Iran crude to continue

The Petroleum Ministry and the Finance Ministry are working in tandem with the Reserve Bank of India (RBI) to work out an “oil payment” formula for Iran that would be long-lasting and effective.

Fruitful discussions

The multi-disciplinary ministerial team, which visited Tehran last week, had already submitted its report to the Government. “We have a lot of leverage as the EU sanctions will only become effective in July. Our discussions with the Iranian counterparts have been quite fruitful and we are hopeful of finding a solution to the payment problem soon. As such, payments are being made without hindrance at present through the Turkish bank route but we don't want to be caught unaware,” a senior Petroleum Ministry official said.

The inter-ministerial agencies and the RBI are working on various options that could include payment in the form of rupee account or through the yen route. However, the official termed as “baseless and unworkable” the report that India was looking at paying Iran in the form of gold. “The Petroleum Minister, Jaipal Reddy, has already made it clear that India will not be dictated by any individual country of a bloc for imposing sanctions against Iran, and was bound by UN-backed sanctions. We will continue to source our crude supply from Iran,” the official said.

Interestingly, Essar Oil is also understood to have renewed its contract for supply of crude oil from Iran for another five years. In reply to a query by The Hindu on its sourcing further crude supplies from Iran, an Essar spokesman said: “We decline to comment and Essar Oil continues to be able to source the crude that it requires from Iran.”

Positive attitude

On his part, Mr. Reddy said, “I can only say Iran's attitude to India is still positive. We have made our best efforts to make payments. In spite of difficulties, the Iran Government has put up with us. It will be our effort to tap Iran as a source of crude oil fully.”

Mr. Reddy said India would respect every bit of sanction imposed by the UN.

“We do not go by sanctions imposed by regional blocks or individual nations,” he said virtually rejecting U.S. sanctions that deny access to the U.S. financial system to any foreign bank that conducts business with the central bank of Iran. “The situation is still evolving. We will find ways of meeting the situation as it evolves,” he said on the issues of exploring new options for making payments in case the current conduit through Turkish bank came to a halt.

Iran accounts for 12 per cent of India's crude oil imports and there are fears that Turkey may come under pressure and stop routing payments. “Iran is the second largest supplier of crude oil to India. There will be no energy supplies problems even in case of shutdown of supplies from the Persian Gulf nation. Indian refiners are looking at diversifying their sourcing to avoid problems in future,” he said. State-run Mangalore Refinery and Petrochemicals Ltd (MRPL) is the largest buyer of Iranian oil at 1.42 lakh barrels a day.