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India to pay oil debts to Iran in euros

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)
India's Petroleum and Natural Gas Minister Dharmendra Pradhan says a deal has been reached between Tehran and New Delhi to settle oil debts in euros.

India says it has reached an agreement with Iran to pay all outstanding debts to the country for previous oil purchases in euros. 

India’s Petroleum and Natural Gas Minister Dharmendra Pradhan has been quoted by the media in Tehran as saying that New Delhi’s oil payments to Iran will be made through a bank in Turkey. 

On the same front, Iran’s Oil Minister Bijan Zangeneh has been quoted as saying that two more banking channels will be opened in the near future to handle India’s outstanding and future oil payments to Iran. 

Zangeneh said the same channels will enable the Central Bank of Iran (CBI) to access $6 billion that India owes the Islamic Republic. 

He further emphasized that all payments from India to Iran will be in cash and no barter in goods and commodities will be ever made. 

Indications appeared in the media in early March that the two sides have come across differences over settling of the debts.

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 on 6 March.

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 around 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 in New Delhi had previously said Iran wants its dollar dues in full without factoring in the exchange rate. They had added that refiners like Essar Oil on the other hand want to pay rupee equivalent of the purchase at current rate.

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