Iran To Open Accounts In Indian Banks For Settlement Of Trade Payments

TEHRAN (NNN-FNA) -- In a fresh initiative to resolve all aspects of a contentious issue regarding Indian crude payments, Iran's central bank decided to open accounts with two Indian banks through which it will receive payments for its crude supplies to India, and will then use that money to pay for Indian exports.

According to reports now circulating, Indian oil firms will pay 20 per cent of their import dues to Iran through rupee accounts in India's state-run IDBI Bank Ltd and the UCO Bank.

The accounts would be used to pay for half of India's oil and non-oil imports from the Islamic Republic, reports suggested.

Iran and India have struggled to find a conduit through which to clear accumulated debts arising from import of Iranian oil.

Last December India's central bank suspended a regional clearing house mechanism which blocked overt routes to clear payments for bilateral trade. The bank made its move under US pressures.

Western powers, backed by the United States, have been trying to isolate the Islamic Republic over its peaceful nuclear program.

The move led to an accumulation of huge debts from the bilateral oil trade. After unsuccessfully attempting a European conduit for payments, Indian oil firms then cleared debts through the Turkish state-owned Halkbank.

The arrangement, while helping Iran in clearing its dues still left Indian exporters stranded as no mechanism had been worked out to settle their dues.

Reports quoted unnamed sources as saying Indian oil companies would continue to pay the remaining 80 per cent of their respective dues in Euros through Halkbank.

Reports suggest that $3.68bln of Indian oil payments between September 2010 and December 2010 deposited in a German bank could be used to open accounts in India.

The rupee accounts are likely to ensure stability in transactions between India and Iran and will follow a pattern of similar arrangements that Iran has with other importers of its products, such as China and South Korea.

Last week, a statement from India's finance ministry said both countries had agreed on a mechanism to ensure smooth goods trade flows, including payments to Indian exporters.

Reports also suggested that should the Turkish bank come under pressure, then India may tap Russian banks to clear its debt to Iran.

Indian exports to Iran are valued at $2.7 billion in 2011/12 for the April-March period, while imports were about $10.93 billion, according to the website of India's commerce ministry. -- NNN-FNA