Iran has asked Indian refiners such as Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MRPL) to clear its past oil dues amounting to over $6 billion in euros within six months.
With US lifting sanctions, Iran has told Indian authorities that the three-year old mechanism, paying 45 per cent of oil import bill in rupees and keeping the remaining 55 per cent pending for payment channels to clear, has come to an end.
The pending payments now total to over $6 billion which Iran has agreed to receive in installments over the next six months, sources privy to the development said.
Central Bank of Iran’s vice governor Gholamali Kamyab has conveyed to Indian authorities that crude oil proceeds from now on would be in euro as Iran would not be able to undertake US dollar settlement through the US financial system.
Iran will be opening or re-activating euro accounts with Indian banks and would like to have the money transferred from refiners into these accounts.
The Persian Gulf nation is talking to State Bank of India (SBI) 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.
Kamyab stated that National Iranian Oil Company (NIOC) would ask buyers of crude in India to open Letters of Credit (Lcs) in favour of Central Bank of Iran with SBI as was the case in past, sources said adding settlement could be done through the ACU and IDBI would be used for the purpose.
Since February 2013, Indian refiners like Essar Oil and MRPL have been paying 45 per cent of their import bill in rupees to UCO Bank account of Iranian oil company. The remaining has been accumulating, pending finalisation of a payment mechanism.
With the lifting of sanctions, the payment channels will reopen and Iran is seeking the pending $6 billion in euros. The payments would be done in installments to prevent a run on the rupee with MRPL likely to be asked to clear its outstanding of close to $3 billion first.
Indian Oil Corp (IOC), which owes over $400 million to Iran, may be the second in the queue followed by smaller payments by HPCL-Mittal Energy Ltd (HMEL) and Hindustan Petroleum Corp.
Essar Oil may be the last to clear its about $3 billion dues.
Sources said Iran has not yet decided on utilisation of the $3 billion which has accumulated in the rupee account with UCO Bank.
It could use the money to make payments for imports of steel and other commodities from India.