India, Iran firm up oil payment mechanism

Asserting that sanctions from the US can't harm its relations with India, Iran Tuesday said Indian companies will pay for 45 percent of their crude oil imports from Iran in rupees as part of a mechanism agreed between the two countries.

"A suitable mechanism has been found out. All the money not paid by India last year has been paid," Syed Mehdi Nabizadeh, Iran's ambassador to India, told reporters at the Iranian embassy here while alluding to the agreement on the payment mechanism.

"This was the proposal by India and we accepted it. Both the sides are satisfied satisfied (with 45 percent payment in rupees)," he said.

He stressed that the two countries will find a mechanism for payment of the remaining 55 percent.

"The leaders of the two countries are determined to resolve the issue. Different ways have been found. Hopefully, we will not face any problems," he said.

He, however, ruled out gold as an option. "Gold is not suitable," he replied when asked whether Iran will accept gold from India as part of payment for Iranian oil as was speculated earlier.

Iran could also increase its imports of goods from India to settle part of the payments, the envoy said.

Iran’s central bank has opened an account with Indian banks, including UCO Bank, to facilitate the payment for Iranian oil.

Indian companies are also expected to invest in projects in Iran, such as developing its oil and gas fields, extraction of iron ore, and building roads and railways.

India has been in a fix for over a year on finding a viable mechanism to pay for Iranian oil after the Reserve Bank of India scrapped the Asian Clearing Union, which served as a clearing house for trading with Iran.

For some time, India made its payments through a German bank and later a Turkish bank, but the US sanctions have made these options unviable.

India has made it clear that regardless of the sanctions, it will continue to buy Iranian oil as it contributes around 12 percent of its oil imports and is necessary for the country's energy security.

The Iranian envoy admitted that although India could reduce business with Iran in the wake of the sanctions, the US can't harm India-Iran relations. He, however, made it clear that Iran will not offer a discount on crude sales to Indian refiners. "Oil prices are an international issue... The price of oil is based on a formula. It should be equal for all," he said.