Seeking to amicably resolve the oil payment crisis that threatens to disrupt crude oil supplies to India from Iran, an Indian delegation will leave for Tehran on January 14 in a bid to settle the currency payment issue pertaining to purchase of oil.
A delegation led by the Additional Financial Services Secretary, Rakesh Singh, and comprising officials of the Petroleum Ministry and ONGC Videsh Limited (OVL) will visit Tehran to negotiate with the National Iranian Oil Company (NIOC) the mode of payment for crude oil purchases that has dogged the two countries during the last almost one month due to U.S. imposed sanctions that bans payment in dollars and also makes it difficult for India to route payments through the traditional Asian Clearing Unit (ACU) route.
“The delegation will go on January 14. We have to work out some currency other than the dollar in which payments could be made for the Iranian oil,” Financial Services Secretary R. Gopalan told reporters here.
Mr. Gopalan said the options for settlement being considered at present are in euro, the yen or dirham. He, however, admitted that paying for the Iranian crude in rupees would be difficult.
India has no other option but to find a solution to this issue as Iran is the second largest oil supplies to India after Saudi Arabia, a Petroleum Ministry official said.
Reserve Bank of India officials held talks with a delegation of the Central Bank of the Islamic Republic of Iran last month to break the deadlock, but nothing could be worked out.
Public sector oil companies in India, the major importers of crude oil, have already expressed concern at the RBI's decision not to allow the Tehran-headquartered Asian Clearing Unit (ACU) to be used for making payments to Iran. One of the solutions suggested by the Petroleum Ministry was that the Central Bank of the Islamic Republic of Iran could open an account with the RBI in India for companies to make direct payments, something that has not found favour with the RBI.
Another option being talked about is that India could write to the European Union (EU), seeking exemption from the certification process required for imports from Iran. Till October 2010, the transactions between the two countries were carried out in euro through the ACU, which was set up in 1974. The clearinghouse settles trade transactions with Bangladesh, Bhutan, India, Iran, Nepal, Pakistan, the Maldives, Myanmar and Sri Lanka.
In the absence of a mutually acceptable payment mechanism, India may not be in a position to import 10 million barrels of crude oil from Iran next month. India imported 21.3 million tonnes from Iran in 2009-10; imports are expected to be 18 million tonnes this year.
