India Weighs Options To Pay For Iran Oil Imports

Discussion in 'Foreign Relations' started by SpArK, Jan 21, 2012.

  1. SpArK

    SpArK SORCERER Senior Member

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    India Weighs Options To Pay For Iran Oil Imports


    NEW DELHI, Jan 20, (RTRS): Indian officials are in Tehran exploring various options to keep paying for Iranian oil, as new US sanctions threaten to derail purchases by Asia’s third-largest crude consumer.


    Indian refiners currently pay Iran through a Turkish bank, but the latest US sanctions may soon make that impossible, and New Delhi is looking at alternatives, including using the rupee, to settle its $12 billion annual import bill.


    India relies on Iran for about 12 percent of its oil needs, but like other buyers such as Japan and South Korea, it is seeking to diversify supplies as the United States and its allies put pressure on Iran to curb a nuclear programme they say is aimed at developing an atom bomb.
    Iran says its goal is to produce nuclear power.



    Refiners started using Halkbank mid-2011, but the bank has refused to open an account for state-run Bharat Petroleum Corp to pay for oil from Iran.


    Here are a few possible alternatives routes that New Delhi could consider to pay for the 350,000-400,000 barrels per day it imports from Iran.


    India and Iran could agree to settle trades in the rupee, and the government would allow Iran’s central bank to open an account with an Indian state-run lender, a government official said, confirming a report by the Indian Express newspaper.


    The report, published last week, said such an account could be used by other countries to pay for their crude imports from Iran. India could also offer Iran the option to buy a limited amount of government bonds.

    But the rupee is not the US dollar.

    The rupee is only partly convertible, was the worst performing major currency in Asia last year, losing about 16 percent against the dollar, and it remains volatile.

    Even if both nations agreed to use the rupee, India’s exports to Iran are quite small — exports were worth about $2.7 billion in 2010/11 — which could create a funding problem for Indian banks and leave Iran holding onto wads of a currency many other countries would be unwilling to accept.

    In the long-term, India may increase its exports to Iran, including funding large-scale projects in the railway infrastructure, ports, mining, automobiles, fertilizer and pharmaceuticals sectors, the Indian official said.


    Payments under this so-called ‘Oil for Projects’ plan would then come out of rupee accounts held by Iran’s central bank.

    One way of ring-fencing such investments from sanctions is to create consortia with Russian, Chinese and Kuwaiti companies. That way no single country or company could be singled out, the Indian Express said.


    The Indian government says the Turkish route is still working, but both sides consider it vulnerable. Its survival could depend on how much pressure Washington puts on Turkey, a Western ally, which itself is dependent on Iranian oil for about 51 percent of its needs.
    Turkey and Iran have said they want to increase financial transfers and that work is underway to strengthen banking ties.



    India could look at alternative banking systems, especially in Russia, a Cold War-era ally that is still New Delhi’s biggest defence equipment supplier.

    Prime Minister Manmohan Singh visited Russia last month and urged Russian leaders to help find an alternative banking route to pay for Iranian oil. Two Russian financial institutions — VEB and Gazprombank — have been mentioned in Indian media reports.

    While Gazprombank has officially said it has no plans to open accounts for Indian companies to settle with Iran, officials in New Delhi have insisted the Russian banks option was on the table. One Indian newspaper report has said there were efforts to open an account in South Korea’s Woori bank.


    New US laws, passed on Dec 31, allow waivers to firms in countries that significantly reduce dealings with Iran, or at any time when it is either in the US national interest or necessary for energy market stability.


    Indian Foreign Secretary Ranjan Mathai has said New Delhi will not ask the United States to exempt its companies from doing business with Iran.

    But the government’s final decision on seeking a waiver would depend on whether India could find adequate alternatives, and refinery sources have told Reuters they have been asked to look for around for other suppliers.

    The government’s argument for not seeking a waiver is that it would provide only temporary relief as the exemption would only be for 120 days, Indian officials have said.

    India weighs options to pay for Iran oil imports
     
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  3. spikey360

    spikey360 Crusader Senior Member

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    US is inviting trouble for itself trying to stifle the world of Oil. This will have great repurcussions for the world and the US would not be spared ultimately. To see all countries on Earth as 'Threats to the US' is a crime, and they should know it.
    As far as payment to Iran is concerned, hope that we have the required leverage with the Russians to make them route our money to Iran, else our country may fall in dire straits. As it is, petrol prices are at an all time high, and amidst all this, this payment problem could further complicate the whole situation.
     
  4. Tshering22

    Tshering22 Sikkimese Saber Senior Member

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    The alternate ways are always there:

    - Iran agreed to accept Rupee payments; I don't understand why the hell our government (for weird reasons) is not going ahead with Rupee payments.

    - Russian Ruble is an option but then I doubt whether Iranians would be too happy because they would end up with a rainbow of reserves which is not good for them either.

    - Renmibi is the last option of choice since that would mean we involve China in something as serious as our annual energy imports. Not really a good options.

    Best one: Go with the Rupee-Toman transaction.

    I don't understand why we shouldn't adopt it.

    - Japan and China have agreed for Yen-Renmibi transactions.

    - Russia and China trade in billions with Ruble-Renmibi transactions.

    - Even SL has accepted SLR-Renmibi transaction.


    I think our Rupee should come forward into the foray as a global currency too. We are not a high ranked currency like USD is but hey, we aren't Japanese Yen either :lol:.

    Having a symbol is not enough for global significance; one must take the tough decisions to be known around the world.


    Basically what I understand is that the US threatens anyone who doesn't trade oil in dollars. But I don't see why would US risk an invasion on the subcontinent at this time if we use Rupee-Toman route.
     
  5. Bangalorean

    Bangalorean Stars and Ambassadors Stars and Ambassadors

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    Good suggestion about trading in our respective currencies. The US won't be able to do a thing, whatever we do. The days of sanctions are long past - India is much larger, important and more powerful these days than it was in the 1990s. I say, bring it on! :thumb:
     
  6. Tshering22

    Tshering22 Sikkimese Saber Senior Member

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    They are not the hurdle, our stupid government is. Rather than actually agreeing for Rupee-Toman payment mode, they are still desperately finding an alternate. I am just praying that this government doesn't make the entire country hostage to oil prices because of its own incompetency.
     
  7. ganesh177

    ganesh177 Regular Member

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    India, Iran to settle some oil trade in rupees: source

    (Reuters) - India and Iran have agreed to settle some of their $12 billion annual oil trade in rupees, a government source said on Friday, resorting to the restricted currency after more than a year of payment problems in the face of fresh, tougher U.S. sanctions.

    India, the world's fourth-largest oil consumer, relies on Iran for about 12 percent of its imports or 350,000-400,000 barrels per day (bpd) and is Tehran's second-biggest oil client after China.

    But Washington has snapped tighter financial sanctions on Iran and wants Asia, Tehran's biggest oil market, to cut imports in a bid to pressure the Islamic nation to rein in its nuclear ambitions, which it suspects are aimed at making weapons.

    Iran rejects the charge and says its programme is for peaceful means.

    India's central bank stopped one clearing mechanism in December 2010 for Iran payments and refiners finally managed to secure a route through Turkey's Halkbank HALK.IS in July 2011 but this could be vulnerable to the new U.S. measures.

    An Indian delegation has been in Tehran this week discussing options for payment and the source said the decision to pay in rupees was made after a meeting there.

    "The Central Bank of Iran will open an account with an Indian bank for receiving payment and settling its import," the source, who has direct knowledge of the matter, said, adding the new system will start "soon".

    The source did not specify the name of the Indian bank. But other sources have said that Iran could open an account with India's UCO Bank as it does not have any interests in the United States.

    In addition to rupee payments, Indian refiners will continue to make payments through the current mechanism using Halkbank, this source said, "as long as it continues".

    Turkey and Iran said on Thursday they want to increase financial transfers and that work is underway to strengthen banking ties.

    The new U.S. sanctions, authorised on December 31, penalise any financial institution dealing with Iran's central bank, the main clearing house for oil payments. However, a country can earn a waiver if it significantly reduces trade with Iran.

    India, whose biggest supplier is Iran's OPEC and regional rival Saudi Arabia, has said it will not seek a waiver and will continue to trade with Iran, following only U.N. sanctions.

    India Trade Secretary Rahul Khullar said this week that the Indian delegation to Iran would work around the U.S. sanctions to protect oil supplies and promote Indian exports.

    The government source said Iran has agreed to step up imports from India which added up to some $2.7 billion in 2010/11 and including oilmeal, rice and tea.

    "This will cushion them (Iran) to some extent from exchange rate volatility," the source said.

    The rupee is only partly convertible, limiting its acceptability internationally. In addition, it was the worst performing major currency in Asia last year, losing about 16 percent against the dollar, and it remains volatile.

    Asian support for U.S. sanctions is vital since the region buys more than half of Iran's daily crude exports. The European Union has agreed in principle to halting Iranian crude imports and could finalise the ban on January 23.

    China, Iran's biggest crude customer, has rejected the U.S. sanctions as overstepping the mark and defended its extensive imports from the second-biggest oil producer in OPEC.

    (Reporting by Nidhi Verma, Additional Reporting by Annie Banerji and Matthias Williams; Editing by Jo Winterbottom)

    India, Iran to settle some oil trade in rupees: source | Reuters
     
  8. tiranga

    tiranga Tihar Jail Banned

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    some?? Who is congress working for??
     
  9. spikey360

    spikey360 Crusader Senior Member

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    Well, the latest news is that India will pay for iranian oil with gold. Finally, all that gold reserve is gonna come to good use.
     
  10. W.G.Ewald

    W.G.Ewald Defence Professionals/ DFI member of 2 Defence Professionals

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    Gold for Oil: India and Iran Ditch Dollar - Report | Forex Crunch

     

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