Indian refiners start paying off $5b in Iran oil

Indian companies have paid the first installment of their Iran oil debts, Finance Minister Pranab Mukherjee told reporters on Friday, as money owed on shipments of some 400,000 barrels per day had risen to nearly $5 billion (Dh18.3 billion). Mukherjee said India and Iran have resolved their problem over payments, which started at the end of last year when, under US pressure, the Reserve Bank of India scrapped a long-standing regional clearing house mechanism. But the new payment mechanism, which uses Turkey's state-owned Halkbank to route payments to Iran, has not received the US Treasury's blessing. "Treasury has not been consulted on this conduit and has therefore not offered a view," Treasury Department spokeswoman Marti Adams said in a statement. She did not say whether the Treasury would issue a judgment on the arrangement. Article continues below India is Iran's second-biggest customer after China and purchases some 12 per cent of its oil needs from Iran. Washington wants to isolate Tehran over its nuclear programme, which it says Iran is using to develop weapons and although there is no international ban against buying Iranian crude, US sanctions that prohibit transactions with some 21 Iranian state banks make financing difficult. Halting shipments Iran had supplied oil to India essentially on credit for much of this year before announcing last month that it would halt August shipments until payments resumed. The new Halkbank arrangement appears to provide a way out of the impasse. Indian refiner Hindustan Petroleum said on Friday that it had already paid $150 million, would make a $45 million payment on Tuesday, and hoped to clear $1.01 billion in debts to Iran by next month. HPCL said it hoped crude deliveries from Iran would resume in September. The company and fellow refiners Essar and BPCL took an additional one million barrels from Saudi Arabia in August to make up for the halt in Iranian shipments. Mukherjee said the Indian payment conduit's mechanism was confidential. But P.K. Goyal, head of finance at Indian Oil Corp, the country's largest refiner, said Indian companies have opened an account with Union Bank of India, which is making the payments in euros to Halkbank, which is then transferring funds to National Iranian Oil Co's account at the bank. Goyal said on Wednesday the company had paid Iran ¤73 million (Dh382.06 million) using the arrangement. Washington has warned Turkish banks to refrain from transactions with local branches of Iranian state banks that have been slapped with US sanctions, including Bank Mellat.