India is understood to have at last found a solution to the long standing crucial issue of payment for the Iranian crude oil imports. Both India and Iran are learnt to have finalised settlement of dues through a Turkish bank arrangement.
Officials in the Petroleum and Natural Gas Ministry said Indian companies such as the Mangalore Refinery and Petrochemicals Ltd. (MRPL) have opened rupee accounts in the New Delhi branch of Union Bank of India, which will route euro payments to state-owned Turkiye Halk Bankasi (Halkbank) in Istanbul. The bank will then transfer that money to the account of the National Iranian Oil Company (NIOC).
As a run up to fine-tuning the whole system of payments and testing the new conduit, MRPL and Essar Oil last week transferred a small payment to Halkbank. This new arrangement will enable India and the oil marketing companies (OMCs) to clear over $7 billion in outstanding dues to Iran that have accumulated since December 2010.
No clearing system
On December 23 last year, Reserve Bank of India scrapped the Asian Clearing Union (ACU). In the absence of a clearing system run by regional central banks, refiners in February made one big payment through the Grmany-based Europaeisch-Iranische Handelsbank (European-Iranian Trade Bank). However, soon after the payment, this route was discontinued, probably under the U.S. pressure.
Iran has been supplying some 4,00,000 barrels a day on credit since the Reserve Bank move. Iranian oil makes up for 12 per cent of India's oil imports.
Iran, which has been selling crude oil on credit since late December, on June 27 wrote about stopping supplies from August if the dues are not paid.
Refiners have tapped Saudi Arabia, Kuwait and Iraq to cover for any supply disruption from Iran. The MRPL is the largest buyer of Iranian crude at 1,42,000 barrels a day.
The HPCL is already talking to Saudi Arabia and UAE to make up for the shortfall of 2 cargoes a month it gets from Iran under its 68,000 barrels a day annual supply contract. The BPCL had signed up for the import of 1 million tonnes (20,000 barrels a day) from Iran this year. The supplies are to start in August.