More than seven months after the RBI snapped a long-standing route used to pay for imports from Iran, Indian refiners will pay for crude oil bought from the Persian Gulf nation through a Turkish bank.

Refiners such as Mangalore Refinery and Petrochemicals Ltd (MRPL) have opened rupee accounts in the New Delhi branch of Union Bank of India, which will route euro payments to state-owned Turkiye Halk Bankasi (Halkbank) in Istanbul.

Halkbank will then transfer that money to the account of National Iranian Oil Co (NIOC), sources involved in the process said.

MRPL and private sector Essar Oil last week transferred a small payment to Halkbank to test the conduit, which will be used to clear over $7 billion in outstanding dues to Iran that have accumulated.

State-owned Indian Oil Corporation and Hindustan Petroleum Corp Ltd (HPCL) will make payments in the next few days once the test payments are successful.

The Reserve Bank of India (RBI) had on December 23 last year scrapped the Asian Clearing Union (ACU) without assigning any reason, winning praise from the US, which is using sanctions to force Tehran to halt its nuclear programme.

In the absence of a clearing system run by regional central banks, refiners in February made one big payment through Germany-based Europaeisch-Iranische Handelsbank (European-Iranian Trade Bank). However, soon after the payment was made, the US persuaded Germany to discontinue routing the payments.

Sources said Iran, which has been supplying some 400,000 barrels of oil per day on credit since the RBI move, provided no plans for shipping oil in August. Iranian oil makes up for 12 per cent of India’s oil imports.

Iran, which has been selling crude oil on credit since late December, when the Reserve Bank of India halted the use of a clearing mechanism under US pressure, had on June 27 written about stopping supplies from August if the dues are not paid.

Refiners have tapped Saudi Arabia, Kuwait and Iraq to cover for any supply disruption from Iran.

MRPL is the largest buyer of Iranian crude oil, at 142,000 bpd, they said, adding that Essar already has alternative supplies tied up for two-third of the 110,000 bpd of oil it had contracted from Iran.

HPCL is talking to Saudi Arabia and UAE to make up for the shortfall of 2 cargoes per month it gets from Iran under its 68,000 bpd annual supply contract.

Officials said BPCL had signed up for the import of 1 million tonnes (20,000 bpd) from Iran this year. The supplies were to start in August, but the uncertainty over payments has meant that it will not get any crude oil.

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