Sanctions on Iran may force Indian refiners to make rupee payments

Last Updated: Fri, Feb 08, 2013 04:10 hrs

Following the United States’ sanctions on Iranian oil imports, Indian companies may have to go for 100 per cent payment in rupees, as they would not be able to direct 55 per cent of their payment through Turkish Halk Bank. Indian imports from the world’s fourth largest oil producer are expected to go on unhindered.

“We have to go for 100 per cent rupee payments. The government had asked us to cut imports by 15 per cent. We will be depositing the money to the account of National Iranian Oil Co (NIOC) and it is upon them to decide on how to transfer it. Or whether they want to exchange it with goods,” said a top official from an Indian company. Recently, there was a high-level meeting between an Iran delegation and the Indian government to sort out the stalemate. However, the government is yet to come out with a direction in this regard.

The US treasury department has imposed fresh sanctions on Tehran from yesterday, following which India would not be able to direct 55 per cent of its payment through the Turkish bank. Indian refiners were routing 45 per cent of payment through Kolkata-based UCO Bank. According to a top UCO Bank official, they haven't got any direction from the government on this.

The new sanctions also mean that countries would have to go for payment on exchange of goods and also in local currency, which may crunch Iran’s monetary system. Further tightening comes on the backdrop of Iran’s supreme leader, Ayatollah Ali Khamenei, rejecting the Washington offer for talks on Iran’s nuclear programme. According to a Bloomberg survey of refiners, the OPEC member would lose $2.5 billion of revenue due to global sanctions.

Government officials said though Iran has fallen from the rank of the second biggest supplier to India after crude oil purchase was brought down, a complete stoppage of supply is ruled out. “We will not stop importing from Iran, though there is a considerable cut in imports. Moreover, it will not affect the overall supply to India, as we are looking at other countries like Saudi Arabia and Kuwait,” said P P Upadhya, managing director, Mangalore Refinery & Petrochemicals (MRPL), an ONGC subsidiary.

MRPL, the largest importer of Iranian crude in India, has brought it down 39 per cent from 6.2 million tonnes (mt) during the last financial year to 3.8 Mt this fiscal. “The contract was to import about 5 Mt from that country, but we had to bring it down because of the US sanctions,” said a top company official. However, according to sources, the central government has not given any direction on payments as of now. After the first set of sanctions last year, India had brought down its imports from Iran to 13.5 mt this financial year from 17.4 mt in 2011-12.

Following this, the US administration has given some relief for India as far as sanctions are concerned.

Recently, Iran was pipped by Iraq as the second largest importer from India after Saudi Arabia.

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