India-Iran: Settled to set a Mechanism for Payment of Crude Oil

India and Iran settled to set up a mechanism for payment of crude oil. The mechanism covers the payment to Indian exporters and a few other domains. In the past Iran threatened to discontinue crude oil supplies to India in case a means to pay for imports was not found swiftly. India is due to pay Iran $9 billion, which is now 7 months in arrears. After Saudi Arabia, Iran is the 2nd biggest oil supplier to India. India is Iran’s 2nd biggest oil buyer after China. India accounts for nearly 20% of Iran’s exports. About 12% of India’s oil demand is met from Iran. Indian companies are discovering it hard to pay Iran owing to the International sanctions forced over Iran’s disputable nuclear programme. These sanctions over Iran consist of banking restrictions. The trouble over payment to Iran arose subsequent to the RBI’s scrapping of ACU (Asian Clearing Unit) on December 23, 2010. India tried to clear payments via countries like the Russia UAE and Turkey, as a substitute to ACU. But, these countries had expostulations to steering huge sum of $13 billion which India pays for Iranian oil yearly. They sought to transmit little payments of $6-7 million.

*Mangalore Refinery and Petrochemicals-a susidiary of ONGC– is the prime consumer of Iranian crude in India.

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