Rosneft has undertaken to settle over 2 billion euros ($2.4 billion) owed to Iran for past oil purchases by Essar Group after the biggest Russian oil producer bought the Indian refiner on Monday, Press TV reported.
Iran’s crude sales to India more than doubled in 2016 after the lifting of sanctions, but New Delhi plans to cut purchases from Tehran by 3 million tonnes during the financial year that started April 1.
Essar’s debt to the National Iranian Oil Company (NIOC) is mostly related to the time when Iran was under sanctions and the country had problems for repatriation of its money.
The top Indian buyer of Iranian oil, which operates a 400,000 barrels per day oil refinery at Vadinar in Gujarat, carried out its first repayment of a $500 million debt owed to Tehran in June 2016.
While Indian refiners continued to lift Iranian oil under the sanctions, they did not do it without special incentives, including a credit period of 90 days granted by Tehran.
NIOC has cut this period to 60 days after the lifting of the sanctions, much to the chagrin of the Indians who want the arrangement to remain intact.
Under the sanctions regime, the Indians had agreed to pay oil dues in dollars, but they finally forced Iran to agree to a settlement half in dollar and half in rupee.
According to Iranian MP Asadollah Gharekhani, the rapporteur of Majlis Energy Commission, Iran's revenues shrank 30% after the rupee depreciated. Ultimately, “instead of cash payments, India sold cheap commodities for Iran's crude,” the lawmaker said.
Future Iran dealings
On Monday, Rosneft completed its $12.9 billion purchase of Essar Oil in the biggest foreign acquisition ever in India.
It is not immediately clear how the acquisition will affect dealings with Iran, but Rosneft has already held negotiations to develop Iranian oil fields.
Key Italian oil refiner Saras which is partly owned by Rosneft resumed purchases of Iranian oil in 2016.
Rosneft’s other partner in the acquisition, Trafigura, is also a client of Iran’s crude oil. Trafigura loaded 2 million barrels of Iranian heavy crude for the first time in June 2016 and was reportedly in talks to supply Iran’s heavy crude grade to independent processors in China.
Reuters, however, reported last year that Rosneft planned to supply Venezuelan oil to the Vadinar refinery. The biggest Russian oil producer has a stake in Venezuelan upstream assets and oil purchase contracts with state-owned PDVSA.
Russia’s Gazprom and Zarubezhneft have signed agreements to develop a number of Iranian oil fields but Rosneft has yet to firm up its involvement in the country.
In June, Rosneft was one of the new entries along with Russia’s Gazprom Neft and Tatneft which NIOC added to its list of international companies named as eligible to bid for projects in Iran’s massive oil and gas.
The Essar deal includes a 98.26 percent acquisition of the refiner by Rosneft, Trafigura and Russian fund UCP, with the rest of the stakes to be held by retail investors.
Rosneft’s Chief Executive Officer Igor Sechin was quoted as saying that the deal would enable Rosneft to improve the efficiency of fuel supplies to other nations in Asia.