AFP: India expects to make a first payment to Iran through Turkey for billions of dollars in unpaid crude oil bills as it seeks to avert a cut-off in fuel shipments, the oil minister said Friday.
NEW DELHI, July 29, 2011 (AFP) – India expects to make a first payment to Iran through Turkey for billions of dollars in unpaid crude oil bills as it seeks to avert a cut-off in fuel shipments, the oil minister said Friday.
Tehran warned late last month it would halt exports to India from next month unless the payments dispute was resolved.
Oil Minister S. Jaipal Reddy said New Delhi expects to pay via Turkey the first tranche of arrears to Iran, which supplies 12 percent of energy-hungry India’s crude needs.
However, Reddy told reporters in New Delhi “we can’t fix time frames” in response to queries about when an alternate payment mechanism would be finalised to pay the bills which total at least $5 billion.
India is Iran’s second largest client after China and absorbs about 20 percent of its crude exports.
But Indian firms have been struggling for more than six months to pay Tehran due to international banking sanctions imposed on the Islamic republic over its nuclear programme.
Reddy added he was hopeful Iran would continue to supply crude to India in August, but added New Delhi has already lined up alternative arrangements with other crude suppliers as a contingency measure.
The Financial Times quoted a senior Iranian oil official earlier this week as saying Tehran would continue crude exports as the two countries were seeking to work out payment methods through new accounts and barter deals.
Rupee accounts could help pay the cost of Iran’s imports from India which include steel, food and electronic goods, the Financial Times said.
Earlier this week, Saudi Arabia agreed to sell three million barrels of extra crude oil to India to offset a possible supply cut, the Press Trust of India reported.
Annual trade between India and Iran stands at an estimated $12 billion, with India purchasing about 400,000 barrels of Iranian crude per day.
The Financial Times said if payment was arranged through barter deals, it would be the first time since the 1980-88 Iran-Iraq war that the Islamic republic had used such a means to be paid for its oil exports.
Reddy said earlier this month alternative supplies were being arranged from countries such as Saudi Arabia, Kuwait and Iraq as well as from Latin America.
— Dow Jones Newswires contributed to this story —