By Nidhi Verma and Amena Bakr
The Reserve Bank of India (RBI) said last month payments to Iran could no longer be settled using a long-standing clearing system run by regional central banks, and the two sides have struggled to find a solution to prevent any disruption to a trade worth roughly $12 billion a year.
“As of now we have no plans to cut supplies to India,” a source at National Iranian Oil Co (NIOC) told Reuters on Friday.
An Indian government source said the issue may be resolved in the next few weeks if Iran satisfies New Delhi’s concerns that the alternative mechanism, possibly involving settlement in euros, does not run afoul of sanctions against Iran.
The uncertainity stems from the last leg of a proposed settlement system under which payments would be routed through the Iran-owned Frankfurt-based EIH bank, a bank suggested by Tehran to Indian firms to handle trade settlements, the source said.
Iranian negotiators, eager to maintain crude supplies to India, have assured that they will resolve the problem so that smooth trade settlements can be made by India, the Indian government source said.
A separate Indian government source said India’s foreign affairs ministry has advised companies and banks against dealing with EIH.
The U.S. Treasury Department in September put sanctions on EIH for facilitating transactions with Iranian banks that the United States and European Union have blacklisted for aiding Iran’s nuclear or missile programs. However, Indian authorities were willing to certify that payment by oil firms is for crude oil purchases, the second Indian government source said.
Iran is India’s second biggest crude oil supplier, exporting about 400,000 barrels per day to four refiners — Mangalore Refinery and Petrochemicals Ltd, Essar Oil, Hindustan Petroleum, and Indian Oil Corp.
“Iran is still sending oil to India, because it’s under a long-term contract and supplies can’t be just cut off like that,” an Iran oil industry official said.
“We are still in talks in terms of the payment issues,” the official added, on condition of anonymity.
India’s MRPL said it wants the matter resolved soon.
“We want the issue to be resolved at the most by the first week of February. After that the matter will become worse as by then we need to finalise the laycan (shipment) dates for March,” MRPL Managing Director U.K. Basu told Reuters.
MRPL is Iran’s biggest Indian client, buying about 150,000 barrels per day of Iranian crude oil.
Basu said Iran had said it would maintain normal supplies in the meantime.
“We finalise the laycan dates in the first week of every month for the next month,” he said.
India-Iran annual crude deals run from April to March.
S. Roy Choudhury, chairman of HPCL, also did not see supply disruption from Iran.
“We are buying crude on 90 days credit. I don’t see any problem in getting crude from Iran. I am hopeful the issue will be resolved soon,” Roy Choudhury told Reuters. (Additional Reporting by Abhijit Neogy in NEW DELHI; Editing by Tony Munroe)
