India, Iran looking at euro, yen to resolve crude payments row

New Delhi, Jan 11 (PTI) India and Iran will look at
currencies like the euro, yen and dirham to resolve the
stalemate over payment for oil imports at their forthcoming
meeting in Tehran, as settlement in US dollars has become
difficult due to sanctions imposed against the Gulf country.
In this respect, New Delhi will send a delegation to
Tehran to sort out the impasse over a mutually acceptable
payment mechanism for imported Iranian crude oil.
"The delegation will go on January 14... We have to work
out some currency (other than the dollar) in which payments
could be made (for Iranian oil)," Indian Financial Services
Secretary R Gopalan told reporters here.
Gopalan said the options being considered at present are
for settlement in euros, the yen or dirham.
He added that paying for the Iranian crude in rupees
would be difficult.
The delegation to Tehran -- which will be led by
Additional Financial Services Secretary Rakesh Singh -- will
interact with their Iranian counterparts to identify banks
through which the transactions can be routed, he said.
Last month, the Reserve Bank of India (RBI)had directed
that imports of oil and gas from Iran should be settled
outside the Asian Clearing Union (ACU), a regional payment
mechanism between nine nations, including India and Iran.
Later, the RBI extended the order to all current account
trade with Iran. Under the ACU mechanism, payments can be made
in either dollars or euros.
Payment for the Iranian crude in euros is still a
possibility, provided a certificate is issued guaranteeing
that the currency is only used for oil imports.
It is, however, not clear who will give this certificate
-- the RBI, the bank that is guaranteeing payment or the
Indian government.
Also, since payments are made on a net basis and not on a
gross basis, it would be difficult to ascertain how much money
is spent only on the purchase of oil and gas.
Besides the euro, the yen is a convertible currency
through which crude imports from Iran could be settled. The
dirham, which is the currency of the United Arab Emirates, is
also being considered for settlement of the crude bills.
However, payment for Iranian crude oil consignments in rupees
may be difficult, as it is not fully convertible.
The RBI move, many say, was made under US pressure, but
the central bank insists that the step will ease the
difficulties in trading with Iran, as settlement in dollars
was problematic. The US has imposed stiff sanctions against
Iran for allegedly pursuing a nuclear weapons programme.
Following the RBI move, several attempts have been made
to resolve the impasse, but the two countries have not been
able to arrive at a mutually acceptable solution.