Indian oil refiners will clear around 6 billion euros ($6.7 billion) of outstanding debt to Iran through Turkey’s Halkbank soon, a senior Iranian economy official said on Wednesday.
India is one of the biggest buyers of Iranian crude and built up a payments backlog when Iran was under Western sanctions, with its refiners owing about $6.5 billion to Iran. They cleared around $770 million in euros through Halkbank to the National Iranian Oil Co (NIOC) in May.
“As per the instructions of the Central Bank of Iran, the local banks in India will transfer the money to Halkbank,” Sadegh Akbari, Iran’s general director for foreign economic relations, told reporters at a conference in Istanbul.
Asked when the remaining funds would be cleared, he said “in a short period of time” but declined to comment further.
The refiners had been holding back some payments to Iran after a channel through Halkbank was closed in 2013, although payment of some of the funds was allowed after an initial temporary deal to lift sanctions.
Last week, on the basis of an advisory from the Reserve Bank of India, India’s oil ministry wrote to refiners saying the remaining dues can be settled in three months from May 30.
It told companies to stagger payments and ensure foreign exchange demand was limited to $500 million per week in a bid to avoid volatility in the forex market.
Iran wants to recover the funds owed by India and other buyers of its oil in euros to reduce its dependence on the U.S. dollar, a source at the NIOC told Reuters in February. Europe is one of Iran’s biggest trading partners, increasing Iranian demand for the European currency.
Akbari said Iran wanted to complete the transfer from Indian refiners via Halkbank because of the “positive banking relations” between Iran and Turkey and said it needed the funds to import products from Turkey and Europe.
He also said the Turkish and Iranian central banks had reopened their connection on the SWIFT global transaction network, in a sign of normalising banking ties.
SWIFT this year reconnected a number of Iranian banks to its system, allowing them to resume cross-border transactions with foreign banks. Iranian banks were disconnected from Belgium-based SWIFT in March 2012 as international sanctions tightened against Tehran over its disputed nuclear programme.