India said on Friday that it had reached a deal with Iran to settle a debt of $6.4 billion for the past oil purchases from the Islamic Republic.
India’s Oil Minister Dharmendra Pradhan has told Reuters that the amount will be paid to Iran through European banks.
New Delhi had so far been unable to transfer the amount to Tehran as a result of the US-engineered sanctions. The sanctions had created a series of draconian economic restrictions on Iran that included a ban on the country’s access to the global banking system.
Nevertheless, they were lifted in January after a deal that Iran had sealed with the P5+1 group of countries – the five permanent members of the Security Council plus Germany – was put into effect.
“There is an agreement between (India and Iran’s) central banks. European banks will be the clearing agent. They will be dealing with Iranian banks and we have to pay those European banks,” said Pradhan.
Indian government sources said during the Indian oil minister’s visit to Tehran last month Iran had asked India to consider clearing the oil payments through Europaeisch-Iranische Handelsbank (EIH) of Germany, Central Bank of Italy and Halkbank of Turkey, Reuters added.
India’s refiners have been holding 55 percent of the country’s oil payments to Iran after a route to make payments through Turkey’s Halkbank was stopped in 2013, although payment of some of those funds was allowed after an initial temporary deal to lift the sanctions.
Also because of the previous sanctions, Indian refiners have been depositing 45 percent of their oil payments to Iran in rupees with India’s UCO Bank.
Tehran has been using the funds, currently about 130 billion rupees ($1.95 billion) to import non-sanctioned goods from India, the report by Reuters added.
Iran was India’s second-biggest oil supplier before the sanctions hampered its trade relations. The country is set to import at least 400,000 barrels per day of Iranian oil in the year from 1 April.