India has made the first euro payments to Iran
in four years to clear part of its $6.4-billion oil debt ahead of Prime Minister Narendra Modi’s visit to Tehran on Sunday, reports say.
The payment through Turkey’s Halkbank was the first since the lifting of Western sanctions against the Islamic Republic in February, Indian media said on Saturday.
State refiner Mangalore Refinery and Petrochemicals Ltd (MRPL) reportedly paid $500 million and Indian Oil Corp (IOC) $250 million, with private sector Essar Oil due to pay another $500 million.
Modi will begin a two-day visit to Iran on Sunday and the issue of repaying the remaining outstanding debt is likely to come up during discussions with officials in Tehran.
To clear part of the debt, New Delhi has offered Tehran investment opportunities in India’s downstream like refiners and petrochemicals units, infrastructure, and fertilizer sectors, Indian media said.
While Iran wants the debt to be paid in euros, there is contention on its value, with one Indian official saying “this requires a political intervention.”
Commercial discussions during Modi’s visit will mainly focus on energy and infrastructure but one of the highlights of the visit will be the signing of a contract to build and operate the port of Chabahar on the southern Iranian coast.
The development of Chabahar is aimed at boosting connectivity with Afghanistan and Central Asia.
Modi will be joined by Afghan President Ashraf Ghani for the conclusion of a trilateral contract on the establishment of a transport and transit corridor among India, Afghanistan and Iran.
The Chabahar-Zahedan-Zaranj corridor is being touted as a potential game-changer for regional connectivity, giving Afghanistan an alternative access to India via the sea.
India is one of the biggest clients of Iranian crude. Indian refiners shipped in 14.4% more oil from Iran at about 251,100 bpd in the 2015/2016 fiscal year, which was the largest since the 2007/08 fiscal year.
Overall, India’s crude oil imports from Iran have topped 500,000 barrels per day (bpd), reaching the highest level in at least five years.
Indian refiners imported 506,100 bpd oil from Iran in March, a jump of about 135% from February.
The country is set to import at least 400,000 barrels per day (bpd) from Iran in the year from April 1, according to Reuters figures.