Azernews.Az

By Sara Rajabova

As removal of the international sanctions on Iran to lift the ban on use of international currencies in trade, the Islamic Republic is willing to get debts for its crude oil in euros or dollars.

Most recently, Tehran has said it wants New Delhi to make settle all unpaid money for oil purchases in euros only.

However, India’s media reported on January 10 that the country is trying to encourage refiners to settle all outstanding payments to Iran over the past oil purchases in rupees.

The Press Trust of India has quoted a senior government official as saying that the country’s Finance Ministry plans to exempt payments to Iran from hefty withholding tax if Tehran approves to receive full payment for oil it sells to India in rupees.

New Delhi’s engagement with Tehran has been rising; it increased its oil imports from Iran by over 50 percent last April compared to the same period in 2014, so India is keen to expand its economic engagement with the Islamic Republic.

India imported an average of 249,000 barrels of oil from Iran over a period of seven months starting April 2015. The figure shows an increase of 5.6 percent compared to the same period in 2014.

India is seen as Iran's biggest oil client after China. However, New Delhi was forced to slash crude purchases from Iran due to the U.S.-led sanctions, which hit Iran’s energy sector back in 2012.

Having long-running energy ties, Tehran and New Delhi also had started talks over further increasing Iranian oil exports to the country as well as retrieving the petrodollars that have been blocked in New Delhi due to U.S.-led sanctions against Tehran.

Indian refineries should pay some $6.5 billion that have been frozen in bank accounts as a result of sanctions against Iran.

Essar Oil has to pay Iran about $3.1 billion, Mangalore Refinery and Petrochemicals Ltd owes $2.8 billion, and Indian Oil Corp owes $581 million. HPCL-Mittal Energy Ltd (HMEL) has to pay $97 million and Hindustan Petroleum Corp owes $29 million, India’s media earlier reported.

With sanctions against Tehran blocking payment channels, 45 percent of the oil India imports from Iran is settled in rupees since January 2012. The remaining gets accumulated and cleared as and when easing of sanctions opens payment window.

In June last year, Iran agreed to receive all of the payment in rupees but wanted waiver of 40 percent withholding tax, the PTI added.

However, Iran may no longer be keen on taking payments in rupee when the option of getting payment in hard tradable currencies like U.S. dollar and Euro is on the verge of opening.

Iran said in late December 2015 that it wants India to pay outstanding oil dues in euros, stressing that it needs the euros to pay the installments for the loans it has received for its infrastructure projects.

Hossein Yaqoubi-Miab, the director for international affairs department of the Central Bank of Iran, said that preparations have already been made by Tehran to receive euro payments from India as soon as the sanctions are lifted.

India has already started the proceedings to make the outstanding payments to Iran in several installments each valuing at several hundred million dollars.

Once the sanctions are lifted, a large share of the cash for Iran that has been frozen in Indian accounts will be transferred to the government accounts in Tehran.

Iran wants its assets that have been frozen in Indian accounts to be transferred to Iran immediately after the removal of the sanctions.

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Sara Rajabova is AzerNews’ staff journalist, follow her on Twitter: @SaraRajabova

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