In a move that could help India clear its pending oil payments to Iran, the Government is planning to allow the sanction hit country to use the money to pay for humanitarian goods such as food and medicines bought in third countries.
The Finance Ministry has asked UCO Bank to put in place the necessary payment arrangements, a Government official told Business Line . This could be done in dollars or euros without attracting any western sanctions.
India owes Iran an estimated $3 billion to $4 billion in pending oil payments as it has not been able to transfer the money in dollars or euros for more than a year. This is due to sanctions put in place by the US and the EU against Iran for its alleged nuclear activities. Once among the largest crude oil supplier to India, Iran has now significantly slipped down the ranks with countries such as Iraq replacing it.
“We are hopeful that we will be able to pay off a substantial part of the pending payments through this method,” the official said.
India put in place a rupee payment system for making 45 per cent of oil payments to Iran in Indian rupees in an account in UCO Bank. The amount was used to pay Indian exporters to Iran.
But, it is the remaining 55 per cent amount held by India in IOU (I Owe You – pending payment) account that is bothering Iran. Since humanitarian goods are not covered by the sanctions either by the UN or the West these can be easily paid for by India if the required processes are put in place. “We plan to start the process as soon as possible,” the official said.
On pursuing oil and gas exploration opportunity in Iran that was put on hold following the sanctions, the Ministry for Petroleum & Natural Gas has now expressed that India is willing to take up work in the discovered Farsi offshore block, now named Binaloud. This discovery was made by ONGC.
India, however, feels that Iran needs to rework the contract and make it more attractive. ONGC Videsh Ltd is keen to develop the Farzad-B gas find. The gas has been discovered by OVL and its Indian partners.
The gas field is estimated to hold in-place reserves of up to 21.68 trillion cubic feet (Tcf), of which 12.8 Tcf of gas and 212 million barrels of condensate may be recoverable.