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India is likely to offer a solution to Iran on the $6.5-billion oil payment issue during Prime Minister Narendra Modi’s visit starting May 22.
The officials of the two nations have been holding discussions and one of the solutions thrown up is clearing part of the debt by offering Iran investment opportunities in India’s downstream (refiners and petrochemicals units), mid-stream (infrastructure), and fertiliser sectors.
“This amount of $6.5 billion is a cumulative figure, which Iran now wants to be paid in euros. While India is willing to pay in any currency that Iran wants, the contention is on the value of euro to be taken,” a top government official said adding that, “this requires a political intervention. The issue is likely to come up during the Prime Minister’s discussions with officials in Iran.”
The payment is for part of the crude oil India sourced from Iran when it was under western sanctions. Part of the payment has already been made in rupees. Iran wants the balance payment to be made through the Asian Clearing Union (ACU) mechanism. The ACU facilitates payment among member countries by economising on the use of foreign exchange reserves and transfer costs while promoting trade.
“This money belongs to Iran and a modality has been worked out. The only question was finding effective banking channels. Even after lifting of sanctions it has not been easy to find a corresponding bank. I am hopeful that effective bank transfers can be made in this regard soon,” said Gopal Baglay, Joint Secretary (Pakistan, Afghanistan and Iran), Ministry of External Affairs.
Energy focusAnother official said that while commercial discussions during the Prime Minister’s visit will mainly focus on energy and infrastructure, regional security will also be high on the agenda.
“Discussions with Iran is independent of what India is discussing with Saudi Arabia as far as higher import of crude oil is concerned,” an official said adding that “import of gas from Iran and mode of transportation will also be taken up.”
Signing of the formal commercial contract on the development of Chabahar Port will be one of the highlights during the visit to Iran.
As per the deal, India will be constructing two berths in the port for an investment of over $200 million. The trilateral agreement on transport and transit corridor among India, Afghanistan and Iran will be also signed during the visit.
The trilateral Agreement using Chabahar-Zahedan-Zaranj as a corridor will be a game-changer for regional connectivity, especially for Afghanistan to find an assured and reliable alternative access to India via sea, he added.
There is also considerable interest in India to invest in Chabahar Free Trade Zone, and in railway projects in Iran, he said.
Modi will be holding a bilateral meeting with Iranian President Hassan Rouhani on May 23.
He will also be calling on Iran’s Supreme Leader Ayatollah Ali Khamenei.
(inputs from Richa Mishra)
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