Oil shipments from Iran will continue to flow into India under an alternative payment system that has been put into place for the time being until the Reserve Bank of India (RBI) and the Central Bank of Iran find a permanent solution.
A senior government official said on Tuesday that NIOC (National Iranian Oil Co) is ready to accept payments from Indian oil firms through the EIH Bank in Germany.
"There has been no disruption in supply since RBI issued new payment guidelines. A cargo for delivery on the eighth and ninth of this month is currently being loaded in Iran and we have no problems sourcing crude from Iran," petroleum and natural gas secretary S. Sundaresan said.
Oil companies like Hindustan Petroleum Corp Ltd (HPCL), Mangalore- based Mangalore Refinery and Petrochemicals Ltd ( MRPL) and Essar Oil will make payments to the State Bank of India ( SBI), which will transfer the money to NIOC's EIH Bank account in Hamburg.
Sundaresan said that a delegation of Indian banks and oil firms, led by a finance ministry additional secretary, will be visiting Tehran on January 14- 16 to find a permanent solution to the issue.
According to industry sources, various currencies, such as rial, dirham and yen, are being considered for putting in place a new payment mechanism.
However, the currency will have to be chosen in such a manner that the US pressure does not lead to stopping of payments.
Senior officials are of the view that the RBI should have first put an alternative payment mechanism in place before suddenly withdrawing the existing facility.
The US was all praise for the RBI move.
Sources said the Iranians are keen to find a solution as Indian firms have been doing business with them for a long time and they do not want their exports to be hit either. The Iranian economy is being choked under US sanctions and they would like to keep their markets open.
The payment problem arose as RBI on December 23 said oil and other import payments to Iran will have to be settled outside the existing Asian Clearing Union ( ACU) mechanism, which involves the central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka.
Under the ACU mechanism imports by the nine nations are settled every two months with every member paying for imports after netting out its exports among the union.
Payments under the ACU mechanism were being made in US dollars but after 2008, when America imposed economic sanctions against Iran for pursuing its nuclear programme, the currency was changed to euro.
United Nations sanctions do not forbid buying Iranian oil and recently the European Central Bank (ECB) asked RBI and other central banks of ACU to provide certificates that the euro spending being used to import products are not on the sanctions list.
In the absence of ACU, Iran and its crude supplier NIOC had reservations over purchases not being backed by the guarantee of the central bank.
India imported 21.3 million tons of crude oil from Iran in 2009-10 and this year imports are expected to be around 18 million tons as Reliance Industries Ltd (RIL) has totally stopped using crude oil from Iran. This works out to around 10 per cent of Indian crude imports.
Indian Oil Corp (IOC), India's the largest retailer, imports "very minimal" quantities of crude from Iran, a senior company official told Mail Today. Any clamp down on the Iranian market would put an upward pressure on oil prices and it is in India's economic interest to keep the market open.
Courtesy: Mail Today