'Iran resolves crude oil payment dispute with India'

"There had been a problem regarding the payment of purchased oil by India, which was created by Germany's central bank for a bank" involved in the transactions, Fars news agency quoted Iranian Economy and Finance Minister Shamseddin Hosseini as saying.

"Through negotiations with Indian and German officials the problem was solved," Hosseini said without giving any details.

But Indian government officials insisted that a solution was "in the process" of being worked out.

"We are working towards a solution," an official said. India in February had begun clearing past dues to Iran by making euro payments through German-based Europisch-Iranische Handelsbank AG (EIH Bank). But EIH, which is owned by Iran, is a banned entity in the US and Washington used its influence on Germany to stop payments.

"We are working with Iran to evolve an alternate payment mechanism. We hope to firm up plans very soon," the Indian official said.

The problem had arisen after the Reserve Bank of India (RBI) in December last year scrapped a long-standing payment mechanism used to pay for Iranian crude imports.

Early in March, Oil Minister S Jaipal Reddy had told Parliament that "pending dues of National Iranian Oil Company (NIOC) are now being cleared and as of March 1, 2011, payment of euro 1.5 billion has been made to the Central Bank of Iran."

But that was the last payment made to Iran as soon after the news broke out, the US clamped down.

Oil supplies from Iran have, however, not been affected and the Persian Gulf nation continues to sell oil on credit backed by corporate guarantee.

India imports 12 million barrels of crude oil every month from Iran, which is the nation's second-largest supplier after Saudi Arabia.

After RBI scrapped the long-standing Asican Clearing Union for making payments to the Persian Gulf nation, Iran, which makes up for over 12 per cent of India's oil needs, had continued to supply oil on credit despite the outstanding amount crossing a staggering USD 3 billion.

Reddy then stated 21.2 million tons of crude oil was imported from Iran in 2009-10 fiscal. Mangalore Refinery imported 6.9 million tons, Essar Oil 5.3 million tons, Reliance 3.3 million tons, Hindustan Petroleum 3.2 million tons and Indian Oil 2.5 million tons.

In 2010-11, Reliance completely stopped using Iranian oil and in first six months 8.9 million tons of oil was imported from Iran, Reddy said.