The Reserve Bank of India seems to be receptive to the idea of rupee payments for crude oil imports from Iran.
“We're evaluating options for Iran crude payment. Oil imports from Iran are continuing … we're considering payments in rupee terms,” the Reserve Bank of India Deputy Governor, Mr H.R. Khan, said onthe sidelines of a National Housing Bank conference.
Earlier too, suggestions were made to make rupee payments, but the RBI had reservations as there were technical issues such as invoicing. India and Iran have been working out a suitable payment mechanism for Iran oil.
Uncertainties over supplies from Iran emerged when in December 2010, the RBI scrapped payments to Iran using the long-standing clearing house system run by Asian central bank.
This resulted in the domestic refiners opting for a payment route through Turkey's Halkbank in July 2011. But this could also be vulnerable to the new US measures.
Fears are that because both the US and Europe have imposed sanctions on Iran citing an alleged military nuclear programme, there may be supply disruptions.
India relies on Iran for about 12 per cent of its crude oil imports. It imports about 400,000 barrels a dayfrom Iran. The monthly payout to Iran for crude oil is about $1 billion.
An Indian delegation was in Tehran recently and an option for payment in rupees was considered. For rupee payment, the Central Bank of Iran will open an account with an Indian bank for receiving payment.
The new US law penalises any financial institution dealing with Iran's central bank.