Related article ~ Bank Deal ~ Iran, Iraq, and Turkey sign bank agreement (Thanks to bama for the following article)
July 29, 2011
India firms start Iran oil payments via Turkey
New, Delhi, Indian refiners will pay for Iranian crude oil through Turkey’s Halkbank after MRPL made a test payment to end a US-inspired impasse that has built up over $5billion of debts and prompted Iran to halt supplies making up 12 percent of India’s demand.
State-run Mangalore Refinery and Petrochemicals Ltd. (MRPL), Iran’s biggest Indian customer, released a small payment in euros through Halkbank, two sources with direct knowledge of the matter said.
“This is the first payment ... We hope this system will continue,” said one of the sources, adding the payment has been made with involvement of Union Bank of India.
The source said payment from Essar Oil, the second biggest Indian client of Iran, is being processed.
Other refiners would also pay in the next few days, potentially allowing flows to resume from India’s second largest supplier of oil after Saudi Arabia.
Iran halted supplies of 400,000 barrels per day (bpd) to Indian refiners for August after a failure to find a payments solution to replace a clearing mechanism that was scrapped in December 2010 by New Delhi under US pressure.
Refiners have managed to cover a quarter of the shortfall through deals with Saudi Arabia.
“This is beneficial to both countries as India is not only a major buyer of the crude that Iran has to offer but also is a reliable one. India on the other hand will also be relieved that it will not have to go looking for big volumes on the spot market, especially in such a high oil price environment,” said Praveen Kumar at FACTS Global Energy.
“As per the new system, Indian firms will need to have an account with Union Bank of India, and Turkey’s Halkbank will give ... confirmation that it will accept payment and transfer the money to NIOC (National Iranian Oil Co.) account there,” said a separate source with one of the state refiners.
“Our documents relating to Iran deals have already been translated into the Turkish language,” this source said.
Halkbank said it complies with UN regulations when asked if it would process payments from India to Iran.
There is no ban under US or UN sanctions, prompted by suspicions Iran’s nuclear program has a military purpose, on India buying Iranian crude, but sanctions have made financing international trade with Iran tough.
“At this moment, it is difficult to say if it is a permanent solution because we have to wait and watch US reaction to it. Earlier India tried through a German bank but that did not last,” said Kumar.
Earlier this year, India tried unsuccessfully to persuade Berlin to allow the two countries to settle trade payments in euros through Germany-based Europaeisch-Iranische Handelsbank (European-Iranian Trade Bank).
But just a week ago, a US official said a solution to the payments issue was in sight, after six months of work with the US.
“We are trying to deliver the first tranches (of Iran oil payments) through Turkey,” Indian Oil Minister S. Jaipal Reddy said earlier.
Reddy said India was making alternative arrangements although it hoped supplies would continue from Iran.
An oil ministry spokesman later denied an effort to make payments had been made through a Turkish bank and declined to comment further on the minister’s remarks.
Refiners Bharat Petroleum, Hindustan Petroleum and Essar have bought crude from Saudi Arabia to make up some of the shortfall in August.
Saudi Arabia has increased its output of oil after its calls for OPEC to raise production failed.
India exports only about $1.9 billion a year to Iran, too little to offset the $11.5 billion or more of crude purchases. Its rupee currency is not freely traded and is subject to restrictions from the central bank.
http://arabnews.com/economy/article480008.ece
