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 for certification of the oil bought is still underway.
After the Reserve Bank of India December stopped the use of a long-standing clearing mechanism for payments, India had on February 3 decided to pay for the Iranian oil using euros through German-based Europisch-Iranische Handelsbank AG (EIH Bank).
Sources said under 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 bought from Iran and payments that are due. 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, 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 for Iranian crude 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 a staggering $3 billion.
Sources said payments for crude oil bought since September are due. Currently, certification of the crude oil bought since September is being done and once the backlog is cleared, certification 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.
Sources said import of crude oil from Iran has not been banned by either the UN or European Union.
India imported 21.3 million tonnes of crude oil from Iran in 2009-10 and imports in 2010-11 are expected to amount to around 18 million tonnes, 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.