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Iran, India disagree over settling oil dues

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
Iran and India have reportedly hit a roadblock over settling some $6 billion in oil dues.

New signs show Iran and India have hit a roadblock over settling some $6 billion in oil dues from previous purchases of crude oil by New Delhi from Tehran.

India’s media reported on Sunday that Gholamali Kamyab, the vice governor of the Central Bank of Iran (CBI), will travel to India later this month to discuss differences with officials in New Delhi over a mechanism to get Iran’s oil money back from the country.

The difference reportedly involves the foreign exchange rate for the sum that India owes Iran.

Iran sold oil to refiners like Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MRPL) in US dollar per barrel. Around 45% of the oil bill was paid in rupees in a UCO Bank account while the rest 55% was to be cleared whenever banking channels open with the removal of the anti-Iran sanctions, reported the Business Standard. 

Rupee to a US dollar was under 55 in February 2013 when the 45:55 payment system became operational. Rupee to a US dollar is at 67 now.

Ideally, if refiners had kept dollar equivalent to their purchase in separate account over the years they could have readily paid Iran now. But for a barrel of oil they bought in February 2013 at say $80, they would now have to pay Rs 5,360 instead of Rs 4,400 then, added the Business Standard.

Sources said Iran wants its dollar dues in full without factoring in the exchange rate. Refiners like Essar Oil on the other hand want to pay rupee equivalent of the purchase at current rate.

Tehran has told India that the three-year old mechanism of paying 45% of oil import bill in rupees and keeping the remaining 55% pending for payment channels to clear, has come to an end.

It will be opening or re-activating euro accounts with Indian banks and would like to have the past money transferred from refiners into these accounts.

Iran is talking to State Bank of India for the purpose and has also opened an account with IDBI.

Also, it wants settlement with India through the Asian Currency Union (ACU) and has written to the Reserve Bank of India (RBI) in this respect, they said.

The National Iranian Oil Company (NIOC) would ask buyers of crude in India to open Letters of Credit (LCs) in favor of Central Bank of Iran with SBI as was the case in past, the Business Standard has quoted sources as saying, adding that settlement could be done through the ACU and IDBI would be used for the purpose. 


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