With help from Turkey and UAE, India solves Iran oil payments debacle

India has worked out a way to pay Iran for some $12 billion worth of oil imports through a convoluted money transfer routed through Turkey and the United Arab Emirates (UAE), the Indian Express reports.

India had been searching for a way to facilitate its oil purchases — which are hampered because the Indian rupee is not honored for international transactions — since European banks began blocking payments under U.S. pressure to implement economic sanctions levied on Iran for its alleged efforts to acquire nuclear weapons.

The scheme envisages opening a rupee account for 20 per cent of the annual buy, payments in lira through state-owned Turkiye Halk Bankasi in Istanbul and in Euro through the Central Bank of the UAE, the Indian Express said.

Last month, National Iranian Oil Company told Indian refiners such as the Mangalore Refinery and Petrochemicals Ltd. and Essar Oil that a payment mechanism should be put in place failing which exports would be stopped from August. The Indian Express quoted an unnamed official as saying that the banks India has identified for the transfer were agreeable to the US which is imposing hurdles against Iranian bank accounts under UN sanctions.

Washington accepted the fund transfer as its suggestion of an offset mechanism — like the South Koreans and the Japanese have with Iran — did not work for India because of skewed balance of payments, he added. India, Iran’s second-largest crude buyer after China, is expected to buy close to $12 billion worth of crude oil this year but would export less than $2 billion worth of commodities and machines.