India is exploring paying for crude oil it buys from Iran in rupee after the US forced Germany to stop routing payments through a Hamburg-based bank.
India in February had begun clearing past dues to Iran by making euro payments through German-based Europisch-Iranische Handelsbank AG (EIH Bank). But EIH, which is owned by Iran, is a banned entity in the US and Washington used its influence on Germany to stop payments.
"We are working with Iran to evolve an alternate payment mechanism. We hope to firm up plans very soon," a top finance ministry official said.
The problem had arose after Reserve Bank of India (RBI) in December last year scrapped a long-standing payment mechanism used to pay for Iranian crude imports.
Early in March, Oil Minister S Jaipal Reddy had told Parliament that "pending dues of National Iranian Oil Company (NIOC) are now being cleared and as of March 1, 2011, payment of euro 1.5 billion has been made to the Central Bank of Iran".
But that was the last payment made to Iran as soon after the news broke out, the US clamped down.
Oil supplies from Iran have, however, not been affected and the Persian Gulf nation continues to sell oil on credit backed by corporate guarantee.
"We are considering various alternatives. Making payments in rupee is one of them," the finance ministry official said.
Reddy on March 3 stated in the Lok Sabha that "consequent to the withdrawal of the Asian Clearing Union (ACU) mechanism by the RBI with effect from December 23, 2010, all payments to Iran for import of crude oil have to be settled in any permitted currency outside the ACU mechanism".
India imports 12 million barrels of crude oil every month from Iran, which is the nation's second-largest supplier after Saudi Arabia.
After the scrapping of the ACU, Iran, which makes up for over 12% of India's oil needs, had continued to supply oil on credit despite the outstanding amount crossing a staggering $3 billion.
Reddy then stated 21.2 million tonne of crude oil was imported from Iran in 2009-10 fiscal. Mangalore Refinery imported 6.9 million tonne, Essar Oil 5.3 million tonne, Reliance 3.3 million tonne, Hindustan Petroleum 3.2 million tonne and Indian Oil 2.5 million tonne.
This fiscal, Reliance has completely stopped using Iranian oil and in first six months 8.9 million tonne of oil was imported from Iran, Reddy said.
