India and Iran have begun fresh negotiations for settlement of payments in hard currency for a major part of the crude imports from early this year. Top banking sources confirmed the development to Business Line .
The resumption of negotiations was made possible thanks to developed countries agreeing to limited relaxation of sanctions on the West Asian Islamic Republic.Reserve Bank of India Deputy Governor H.R. Khan said the Iranian Central Bank has made fresh proposals for payment settlement. Indian oil refiners had cleared the arrears till the beginning of this year.
Staggered paymentKhan said the residual payment dues were much lower and are likely (to be made) in a “staggered” manner. He, however, declined to specify this year’s possible payment figures.
Indian oil refiners had settled all their arrears till January this year in euros through Turkey-owned Halk Bank, another source said. The arrears totalled around $11 billion. The crude importers had bought the euros from Union Bank.
However, this arrangement could not be continued during this fiscal as the Turkish bank, under pressure from the European Union and the US, discontinued the facility.
Bankers said as the formal announcement of “relaxation” was awaited following the interim agreement between the US-led group of developed countries and Iran last month, Halk Bank was hesitant to permit any settlement.
This year’s imports could be worth less than $5 billion considering lower volumes compared to last year, sources said. The current negotiations will decide whether Iranian authorities would prefer revival of payments in euros.
India is among the eight countries, including China, South Korea and Turkey, which imports crude oil from Iran. Under the current mechanism, India has been paying for 45 per cent of itspurchases in rupees.
India started settling Iranian payments through Halk Bank in euros beginning mid-2012. The rupee-settled payments were made through UCO Bank.