12 Jan, 2011, 10.10PM IST,PTI Iran to sell crude to India on credit this month

NEW DELHI: Weeks after RBI clamped down on the main conduit Indian companies use for paying Iranian oil, the Persian Gulf country has agreed to sell crude oil on credit this month.

There were no problem in supplies till early last week, as payments mechanism had been decided prior to the Reserve Bank of India (RBI) closed the Asian Clearing Union route, a move that effectively stops settlements in US dollars and the euro.

" Iran has agreed to sell crude oil on credit this month pending resolution of the gridlock," a senior official said.

Mangalore Refinery and Petrochemicals Ltd, the nation's largest importer of Iranian crude oil, and other state refiners Indian Oil Corp and Hindustan Petroleum Corp will get some 6 million barrels of crude on 60 to 90 days credit.

"This is a stop-gap arrangement. This cannot last long and a permanent solution has to be found," the official said.

India has asked Iran to identify a panel of banks, which are not under US sanctions, to route payments to National Iranian Oil Co (NIOC). State Bank of India, the nation's largest lender, is ready to facilitate payments but is not willing to deal with any bank on US sanctions list.

The two nations have so far not been able to find a solution on how New Delhi should pay for oil imports from Iran after India's central bank on December 23 said that payments to Iran could no longer be settled using a long-standing clearing house system run by regional central banks.

An Indian delegation would visit Tehran on January 14 to explore payments in yen, euro and dirham currencies.

The official said SBI has refused to route payments through the Hamburg-based EIH Bank which Iran had last week identified as temporary channel for routing money to NIOC.

NIOC has an account in the bank but SBI felt since the bank is already under US sanctions, its business in America may be affected in dealing with EIH.

"Some nine banks mostly in UAE have been identified. Details will be discussed at the January 14 meeting in Tehran," he said.

Iran is India's second-largest supplier of crude oil, after Saudi Arabia. India imports USD 12 billion of crude annually from Iran -- about 14 per cent of its total crude import bill. MRPL buys 7.1 million tons of Iranian oil while IOC and HPCL import 3 million tons each. Private sector Essar Oil imports about 5 million tons.