The prospect of an unprecedented cooperation between arch enemies Iran and the United States has paved the way for resolution of the complex issue of oil payments by New Delhi to Tehran.
India was informed on June 16, the first day of the talks in Vienna between Iran and the West, to deposit the equivalent of $ 550 million in dirhams in the Central Bank of the United Arab Emirates, and to be prepared to pay another $ 1.1 billion in two equal tranches by dates that would be conveyed later.
Tehran was due to receive the sixth instalment of oil funds by May 14, but a delay of over a month occurred after nuclear talks ran into difficulties last month, with each side accusing the other of making unrealistic demands in the ongoing dialogue aimed at curbing Iran’s atomic programme in exchange for an end to economic sanctions.
The $ 550 million is part of $ 4.2 billion blocked crude oil funds that were to be made available to Iran under the agreement signed with the P5+1 (the five permanent members of the United Nations Security Council, plus Germany) in November.
The November deal allowed Iran to receive $ 4.2 billion in eight instalments spread over six months in exchange for agreeing to curb its nuclear activities. Iran has so far received $ 2.55 billion in five tranches — four from Japan, and one from South Korea.
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The seventh instalment, also of $ 550 million, was due on June 17. The final $ 550 million is due on July 20, but is contingent upon confirmation that Iran has fulfilled its commitment entirely.
The payment mechanism outlined by Reserve Bank of India assigns the Indian central bank to identify Indian oil importing refineries as well as their payment share which would be remitted to UCO Bank. UCO will transfer it to Iran’s Parisian Bank for onward dirham transmission to the Central Bank of UAE.
The payouts by each Indian refinery would be in proportion to their outstanding amount. Indian refiners Essay Oil, Bangalore Refinery and Petrochemicals Ltd, Hindustan Petroleum Corp. and HPCL-Mittal Energy Ltd, together owe $ 3.6 billion to the National Iranian Oil Co.
Indian refiners were settling 45 per cent of Iran payments in rupees which Tehran used for importing humanitarian goods from India, while the refiners held the remainder.
However, when three days of negotiations in Vienna between Iran and the P5+1 ended on May 17 with no sign of progress, it asked India for the balance 55 per cent, requesting New Delhi to pay directly to third countries from whom Iran purchased humanitarian goods — food, medicines and medical equipment.
Tehran is now asking for an interest on the delayed payments. RBI has said India would not pay any interest — it had been willing to pay since January 2013, but there was no mechanism in place by Iran to remit the outstanding money in foreign exchange.
The tough sanctions slapped by the West on Iran in 2012 closed banking channels for the transfer of oil payments.
But the crisis in Iraq has sent the US and EU towards a rapprochement that could end 35 years of hostility with Iran. The signals include moves to strengthen Britain’s diplomatic ties with Iran, including reopening the embassy that it shut down in Tehran in 2011.