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India ready to clear $6.5 billion of debt for Iranian oil

02 May 2016 Evaluate

With an aim to step up engagement in hydrocarbon sector with Iran, India has conveyed to the Persian Gulf nation that it is ready to clear nearly $6.5 billion oil import dues at the earliest, provided there is clarity on the payment channel. There has been a series of discussions at various levels, both in Iran and India, and both sides are confident of resolving the matter soon. Refiners like Essar Oil and Mangalore Refinery and Petrochemicals (MPRL) owe nearly $6.5 billion in dues to Iran.

Following lifting of sanctions against it in January under a historic nuclear deal, Iran had terminated a three-year-old system with India of getting paid for half of the oil dues in rupees and has been insisting on being paid in Euros for the oil it sells to Indian refiners. Though Western sanctions against Iran were lifted, problems persist in banking channels due to which regular transactions were not possible yet.

Since February 2013, Indian refiners like Essar Oil and MRPL have been paying 45 per cent of their import bill in rupees to UCO Bank account of Iranian Oil Company. The remaining has been accumulating, pending finalisation of a payment mechanism.

Recently, in order to make up for the foreign exchange losses incurred, Iran had asked Indian refiners like Essar Oil and MRPL to pay interest rate of Libor-plus 0.75 per cent (London Inter-Bank Offered Rate) on the $6.5 billion they owe it in past oil dues.


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