Indian delegation to visit Iran to resolve payment row

A high-level Indian delegation comprising officials of the Finance Ministry, RBI and the Oil Ministry will be visiting Tehran shortly to work out an alternative mode of payment for oil in wake of fresh sanctions imposed by the US on Iran.

"A team from DEA [the Department of Economic Affairs] is going to Tehran...They will work out what [could be done] in terms of the new sanctions under section 1245 of the US Act," Commerce Secretary Rahul Khullar said.

The governments of both the countries would work on modalities both in terms of importing oil and promoting Indian exports, he added.

India is Iran's second-largest crude buyer, taking about 3,52,000 barrels per day (bpd), or 13.5% of Iran's 2.6 million bpd of exports. New Delhi at present pays the world's fourth largest oil producer about $1 billion every month through Turkey.

India fears that Turkey may come under pressure to halt the conduit after US imposed fresh round of sanctions against Iran. The European Union is slated to announce tough measures in this regard on its own at the end of the month.

Refiners have already begun talks with alternative suppliers to slowly replace some quantity of the 3,70,000 barrels a day of oil they buy from Iran.

Routing payments through Russia was discussed during the visit of Prime Minister Manmohan Singh to Moscow last month. However, Russia has so far not agreed to route payments for India due to the "complexities" involved.

US President Barack Obama signed a Bill into law late last month empowering US authorities to impose penalties on foreign banks dealing with the Central Bank of Iran to settle oil import payments.

National Security Adviser Shivshankar Menon last week discussed alternative payment routes with officials from the ministries of finance, petroleum and external affairs.