India cannot yet pay for Iran crude oil via Turkey

Turkey has said it has no immediate plans to resume banking facilities for processing India’s payments for crude oil purchase from Iran, despite slight relaxation in Western economic sanctions against that country.

Speaking to Business Line during his recent visit to India, Trade Minister of Turkey Nihat Zeybekci said while there have been some relaxation in Western embargoes, following an agreement between Iran and the US and the EU on the nuclear issue last November, Turkey is not considering resuming banking links with Iran, yet.

“Turkey is a country that acts in line with the embargoes and decisions of the UN. Currently, we don’t have mechanisms (to facilitate India-Iran oil trade),” he said.

“Of course, when we talk about embargoes, we can see that there is a bit of relaxation or opening in the embargoes. But, currently the normal procedures are on-going (in the area of banking activities),” the Minister added.

India has now put in place a rupee-payment mechanism for buying Iranian oil. Before working out this mechanism, India was routing its payment through Turkish Halkbank to pay for more than half of its oil purchase from Iran. The routing stopped when the bank refused to transfer payments, fearing US sanctions.

The rupee-payment mechanism has its limitations. Since India’s exports to Iran are much lower than its oil imports, Iran is not able to fully utilise the rupee payments accumulating in its account with India’s UCO Bank.

India, under US pressure and due to glitches being faced for sourcing oil from the Gulf nation, has drastically reduced oil imports from Iran, while nations such as China have sustained imports within the permissible limits.

From being the second largest supplier to India, Iran has today slipped to the seventh position. During April-December 2013domestic refiners imported 6.88 million tonnes of crude oil from Iran, just 4.84 per cent of the total imports of 142.16 million tonnes for the period. Zeybekci, who held meetings with his Indian counterpart Anand Sharma, said energy was one of the categories where Turkey was looking for better bilateral ties with India.

“Turkish Ministry of Energy and Natural Resources is interested in the Turkmenistan-Afghanistan-Pakistan-India gas pipeline project. Turkish firms have experience in these countries and I believe that Turkish companies would take part in the project in engineering process, such as production of construction machinery and pipelines. DEIK (Foreign Economic Board of Turkey) will organise a seminar to introduce the business opportunities on this,” he said.