India to use Russian Gazprombank to settle Iran oil debt

Iran Materials 28 October 2011 15:50 (UTC +04:00)

Azerbaijan, Baku, Oct.28 / Trend F.Milad/

An agreement has been reached with Russian Gazprombank to clear off India's outstanding oil payment dues to Iran, the Mehr news agency quoted the National Iranian Oil Company's (NIOC) managing director for international affairs Mohsen Qamsari as saying on Friday.

Qamsari said the NIOC and the Central Bank of Iran have adopted several methods to receive the money for selling oil to India.

Indian finance minister Pranab Mukherjee said in Iran's northeastern city of Tabriz that India would use Turkish, Russian and UAE banks to clear off the outstanding $2.6 billion dues for crude oil imported from Iran.

Iran's central bank will open accounts with two Indian banks to receive part payment for New Delhi's oil imports and use that money to pay for Indian exports, according to an industry source and newspaper report.

Indian oil firms will pay 20 percent of their dues to Iran through rupee accounts in India's state-run IDBI Bank Ltd. and UCO Bank, the source with direct knowledge of the matter told Reuters on Wednesday.

The Economic Times newspaper said the accounts would be used to pay for half of India's oil and non-oil imports from the Islamic Republic, quoting an unnamed government official.

IDBI Bank executive director RK Bansal said he was not aware of the matter, while an official at Kolkata-based UCO Bank declined to comment. The Commerce Ministry referred queries to the Finance Ministry, which was not immediately available to comment.

India and Iran have been struggling to find a permanent mechanism to settle their bilateral trade, especially since December when India's central bank scrapped a clearing house mechanism -- a move welcomed by the United States which is trying to isolate the Islamic Republic over its nuclear programme.

That led Asia's third-largest economy and the second-largest buyer of Iranian oil after China to run up a multi-billion dollar debt to Iran. Indian oil firms have begun making payments in euros via Turkish state-owned Halkbank, but no mechanism is in place to settle dues of Indian exporters.

"(Indian) oil companies will continue to pay the remaining 80 percent of their respective dues in euros through Halkbank," the source said.

About 2.7 billion euros ($3.68 bln) of Indian oil firms' payments for Iranian oil between September 2010 and December 2010 that were deposited in a German bank were stuck after the bank buckled under U.S. pressure and stopped clearing payments to Iran, the source said.