8.11 PM Monday, 11 December 2023
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 05:31 06:50 12:15 15:12 17:34 18:53
11 December 2023

Iran offers India oil supply plan for January

By Reuters

Iran has offered a stop-gap  plan for oil supplies to India for January, an Indian  government source said on Tuesday, but a lasting solution to  the row over how to pay for supplies may take weeks.

India's central bank said last week payments to Iran could  no longer be done through a longstanding clearinghouse system  run by central banks, prompting fears India's $12 billion   annual oil imports from Iran could be threatened.

Iran is India's second biggest crude oil supplier after  Saudi Arabia, accounting for about 13 percent of its total   crude oil imports.

The Indian move came within weeks of US President Barack  Obama visiting New Delhi. Washington praised the Indian  change, saying it would reduce what it sees is a misuse of  funds by Iran to support its nuclear activity, which the West  suspects has military aims.

Iranian central bank officials rushed to Mumbai but talks  have failed to bring an agreement on a new payment mechanism  that also boosts the transparency of their deals, as sought by  the United States.

Iran has suggested Indian firms open an account in the  Iran-owned Frankfurt-based EIH bank. 

But the companies have asked India's state-run State Bank  of India to open an account in EIH to transfer money  into the central bank of Iran, which in turn will pay it into  a National Iranian Oil Company (NIOC) account, the Indian  source said.
"We have got the letter this morning from NIOC," the  source said.
"It says pending a full resolution of the issue at hand,  which is at central banks' level, for the month of January I  am offering you a dispensation, which is to open a euro  account in EIH Bank in which the central bank of Iran has an  account."

The source said Indian officials will visit Iran in  mid-January to work out a long-term solution at the central  bank level for oil payments.

If the impasse continues it could hit Indian imports of  400,000 barrels per day of Iranian crude oil, forcing Asia's  third-largest economy to look for more expensive alternatives  that would swell its already high current account deficit.

India also fears that rival China would step in and buy  Iranian crude that is now shipped to India.

In a bid to hedge itself against supply disruptions from  Iran, Mangalore Refinery and Petrochemicals, the biggest  Indian buyer of Iranian crude, on Tuesday floated a rare  tender to import high sulphur crude oil for lifting during  March 11-20.

"The fact that MRPL has suddenly come out with a tender  seeking high sulphur crude indicates that this is an Iran  impact. MRPL may not want to take chance against other  state-run firms that can take a wait-and-watch approach," said  an Asian oil trader.
An MRPL official said January supplies were expected to be  normal. "Our cargo from Iran sailed off on Jan. 2, it takes  about seven days to reach India so on the ninth it will reach  India."

An official at Indian state-run Hindustan Petroleum   also said his firm's cargo had been loaded at an  Iranian port.

It was not immediately clear whether the payments for the  early January parcels were cleared under the old mechanism or  the stop-gap arrangement now being offered by Iran.

An Indian source said last week that deals between India  and Iran until December 29 had been settled through the old system.

Indian Oil Corp's finance head SV Narasimhan  said his firm did not anticipate any supply disruption.

Although United Nations sanctions do not forbid buying  Iranian oil, the United States has pressed hard for  governments and companies to stop dealing with Iran.

India will need to strike a fine balance between its  energy needs and global diplomatic interests to solve the  dispute.
Iran's Foreign Ministry spokesman Ramin Mehmanparast said  in Tehran: "The issue which was raised over the payment of oil  trade between Iran and India is more about technical issues.

"Our central bank officials had very good discussions with  Indian officials ... We hope the issue resolves soon. Both  parties have expressed hope to resolve this problem swiftly   and we hope it does not harm our trade ties with India."
The US Treasury Department in September sanctioned EIH  for facilitating billions of dollars of transactions with  Iranian banks that the United States and European Union have  blacklisted for aiding Iran's nuclear or missile programmes.