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Days after India put in place a mechanism to pay for Iranian crude oil, payments to the nation’s second largest oil supplier are yet to begin as the tedious process of certification is still underway.
After the Reserve Bank of India stopped the use of a long-standing clearing mechanism for payments in December, India had on February 3 decided to pay using euros through the German-based Europch-Iranische Handelsbank AG (EIH Bank).
Sources said as per the requirement of the German central bank, Deutsche Bundesbank (DBB) — which had permitted payment in euros through EIH — each drop of oil bought from US-sanctioned Iran is being certified.
First, the oil companies are certifying the crude oil they buy from Iran. This is being counter-certified by the Ministry of Petroleum and Natural Gas.
Furthermore, State Bank of India — the banker which is to route the payments — is also affixing its seal on the transactions, the sources said, adding these will be presented to DBB, which will then authorise the transfer of euros to the bank account of National Iranian Oil Co (NIOC).
SBI had refused to facilitate payments for Iranian oil after the RBI on December 23 disallowed payments using a long-standing clearing house system run by the central banks of nine countries — including India and Iran — dubbed the Asian Clearing Union (ACU).
However, Iran, which makes up for over 12 per cent of India’s oil needs, had continued to supply oil on credit despite the outstanding amount crossing $3 billion.
The sources said payments are due for crude oil bought since September. Currently, certification for the oil bought since September is being done and once the backlog is cleared, it would be done on a monthly basis.
After the certification, oil companies like Essar Oil will transfer money to SBI, who in turn will use its Frankfurt branch to route payments to EIH.
The sources said import of crude oil from Iran has not been banned by either the UN or the European Union.
India imported 21.3 million tonnes of crude oil from Iran in 2009-10 and the imports in 2010-11 are expected to touch around 18 mt, as Reliance Industries has totally stopped using crude oil from the Persian Gulf nation.
The nation imports 12 million barrels of crude oil every month from Iran, which is the nation’s second-largest supplier after Saudi Arabia.
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