India has offered Iran the option of investing its oil money in specific sectors, including oil refining. The move indicates a softening of New Delhi's stand in the face of oil supplies from the Gulf country getting stuck due to problem in routing payments, reported The Times of India.
India has run up an unpaid bill of around $2 billion for oil sourced from Iran as it could not make payments in the absence of a settlement mechanism. The earlier system had to be scrapped by RBI in the wake of UN and US sanctions.
Earlier this year, Germany allowed India to pay for the oil via Hamburg-based EIH bank which handles international trade for Iranian companies. But India halted that conduit in early April after discussions with German Chancellor Angela Merkel and EIH has since come under EU sanctions.
Investment in certain sectors was discussed during meetings between Indian and Iranian officials on Monday and Tuesday. The two sides could, however, not agree on a mechanism though officials said some progress has been made.
Given the volume of trade, estimated at around $12 billion annually, Iranian companies would have to invest that amount in India every year, which might be a problem. Investment from Iran is also going to raise eyebrows in the international community which is putting pressure on Tehran over its nuclear programme. Also, the exchange rate could prove to be another hurdle.
Another option is to settle the dues through a third country with which both India and Iran have sizable trade. Settling the payment crisis is crucial as Iran is India's second-biggest supplier for crude after Saudi Arabia, exporting about 400,000 barrels per day or 12% of the fast-growing Asian country's needs in trade worth some $12 billion a year.