India considers more Iran oil imports, readies payments of 'billions of dollars'

Nov 26 2013, 19:01 IST
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Refiner HPCL actively considering buying Iranian oil (AP) Refiner HPCL actively considering buying Iranian oil (AP)
SummaryIndia, second-largest buyer from Iran, owes it $5.3 bn

India could step up crude imports from Iran next month and start transferring billions of dollars it owes for oil as early as next week, following a deal between Tehran and six world powers to curb the Islamic Republic's nuclear programme.

The agreement eases some of the sanctions on trade with Iran that have slashed the OPEC member's exports by more than half and cost it as much as $80 billion in lost oil sales since the beginning of 2012, according to White House estimates.

Iran's biggest oil buyers - China, India, South Korea and Japan - have all cut back sharply on purchases.

The deal, struck on Sunday, also suspends sanctions provisions on insurance, which had left refiners that processed Iranian oil without cover and resulted in India's imports falling to below even the level permitted by sanctions.

The removal of the EU restrictions on insurance opens the door for Indian refiners to increase imports to contract levels without breaching sanctions that remain in place limiting Iran's overall exports to around 1 million barrels per day (bpd).

"Till yesterday this crude was not under consideration because of insurance hurdles, but now because of this recent development ... Iranian crude has come into active consideration of HPCL," B. K. Namdeo, head of refineries at state-run Indian refiner HPCL, told Reuters.

For HPCL, that could mean an extra 50,000 barrels per day (bpd) in December to March - about a quarter more than India's daily average Iranian imports over the first nine months of 2013.

BANK TRANSFERS

The United States had tightened the noose further on Iran's biggest revenue stream in February by asking its oil buyers to stop transferring payments to Tehran and instead keep the money in bank accounts in the currency of the importing country.

Effectively shut out of the global banking system, Iran has been able to use that money only to buy goods and services from the importing country and the cash in those accounts has quickly built up.

The new agreement would let Iran receive about $4.2 billion in oil money from accounts held abroad if it fulfils commitments under the deal over the next six months. It is unclear how much Iran will receive from each country.

A joint commission from Iran and the six powers is supposed to decide which foreign banks can transfer the money to Tehran, what currency they will use, and which Iranian banks will get the cash, a senior US

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