India willing to pay Iran for crude oil in a currency of its choice

India has told Iran that it is willing to clear the pending crude oil payments of over $3 billion in a mode of currency of Iran’s choice.

These pending bills are for the period starting February 6, 2013, when the Turkey route of payment for oil sourcing was halted following the Western sanctions on Iran.

“We are still awaiting their (Iran’s) response,” a senior Petroleum Ministry official said. India is hoping that Iran’s recent talks with the US would give some space and clarity on the currency in which the payments have to be made.

Recently, Iranian Foreign Minister Javad Zarif was quoted as being disappointed with India’s decision to cut oil imports following US sanctions. On the oil import payment issue he had said that Iran expects India to repatriate the money “in one way or another”.

Following the Western sanctions on Iran, India had put in place a rupee payment mechanism which allowed it to pay for 45 per cent of oil purchase in its local currency. The mechanism has so far been successful with very little money lying idle in Iran’s Rupee account held with UCO Bank.

India’s exports to Iran have almost doubled to $4.2 billion in the first 10 months of the current fiscal compared with $2.4 billion in the same period last fiscal. Also, India expects to buy 11 million tonnes of crude oil from Iran in 2013-14 and similar volumes in the next fiscal.

During the April-January period of the current fiscal, India imported 8.47 million tonnes of crude oil from Iran. Imports from Iran have fallen from 21.20 million tonnes (mt) in 2009-10, to 18.50 mt in 2010-11, 18.11 mt in 2011-12, and 13.14 mt (provisional) 2012-13.

“Now almost all the Indian currency that is deposited with the UCO Bank in Iran’s account in lieu of payment for 45 per cent of India’s oil purchase is getting used up by Iran for making payments for its imports from India,” a Commerce Ministry official told Business Line .

Since India reduced its oil purchases from Iran last year, the trade gap has narrowed further.

Exporters bullish According to estimates made by the Federation of Indian Export Organisations, exports will easily cross the $5-billion mark in the fiscal as buyers and sellers from both sides were meeting frequently to seal deals.

“Indian exporters were hesitant to visit Iran earlier fearing that an Iranian visa on their passports could come in the way of receiving visa from the US, though there was no written rule. But, now the fear is fast easing and Indian exporters are willing to engage more with Iran,” pointed out Anupam Shah, Chairman, Engineering Export Promotion Council.

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