Indian Firms Pay $750m of Iranian Oil Dues

Indian Firms Pay $750m  of Iranian Oil Dues
Indian Firms Pay $750m  of Iranian Oil Dues

Indian refiners have cleared part of the $6.4 billion owed to Iran for crude oil imports in euros through Turkey’s Halkbank, three sources privy to the payment said on Saturday.

State refiner Mangalore Refinery and Petrochemicals Ltd paid $500 million while Indian Oil Corporation has settled $250 million through the Union Bank of India, the sources said, Reuters reported.

This is the first payment to Iran by India since the lifting of western sanctions against the Persian Gulf nation earlier this year.  The payment was made just ahead of Indian Prime Minister Narendra Modi’s visit to Tehran on Sunday.

The refiners had been holding back 55% of oil payments to Iran after the route to make payments through Halkbank was blocked in 2013, although payment of some of those funds was allowed after an initial temporary deal to lift the sanctions.

It is not yet known when the next installments will be paid, the sources said.

India is one of the biggest buyers of Iranian crude and is set to import at least 400,000 barrels per day from Iran in the year from April 1. But it built up a backlog of payments when Iran was under sanctions.

Iran was India’s second-largest oil supplier by 2009, but exports fell dramatically after the US and the EU slammed tougher sanctions against Tehran in 2012 targeting its nuclear program. Modi is on his first trip to Iran, aimed at deepening energy ties.

During the visit, India is poised to sign a contract to build and operate the port of Chabahar on the southern Iranian coast that is aimed at boosting connectivity with Afghanistan and Central Asia.

  Payment Process

During the sanctions, around 45% of the impending oil bill were paid in rupees in a UCO Bank account while the remaining 55% were to be cleared whenever banking channels open.

Talks on settling New Delhi’s remaining debt gained momentum last month during a visit by Indian Minister of Petroleum and Natural Gas Dharmendra Pradhan to Tehran last month. During his visit, Pradhan met with Valiollah Seif, governor of the Central Bank of Iran, to reassure the Iranian government of settling the debt. Earlier this month, the Indian minister said in a statement that the central banks of India and Iran had reached an arrangement to use European banks to process pending oil payments to Tehran.

The two sides have also reached an agreement, based on which New Delhi will pay Tehran an interest of 1.5 % as a “goodwill gesture” for its oil dues to the Islamic Republic.