Indian Finance Ministry officials were discussing possible
solutions with bankers and oil executives ahead of a ministerial visit to
Tehran. But one participant warned of a “long haul” as Indian bankers stopped
issuing letters of credit for the trade.
The Reserve Bank of India (RBI) said last month that
payments to Iran could no longer be settled using a long-standing clearinghouse
system run by regional central banks.
The decision came weeks after a visit to New Delhi by US
President Barack Obama. Washington praised the move, saying it would reduce
what it sees as misuse of funds by Iran to support nuclear activity, which the
West suspects has military aims.
Iran initially refused to sell oil outside the old setup but
later agreed to ensure oil shipments for January.
Talks last week between central bankers of the countries
failed to find a way out that would enable India to continue imports of oil
from its second largest supplier while boosting the transparency of deals as
sought by the United States.
The negotiations underscore the balance India has to strike
between meeting rising energy demand and satisfying increasingly key allies
such the United States and Arab nations wary of Iran’s nuclear ambitions.
“We want a solution as soon as possible, the soonest
possible,” Foreign Secretary Nirupamam Rao told Reuters. When asked if a
solution would be found before February, she said: “Even before February.”
“It is receiving attention at the highest level of the
government,” she said, adding a ministerial delegation would be traveling to
Iran in the next few days.
Rao said India would find a solution compatible with its
international commitments.
“We want to resolve it in keeping with UN sanctions.”
The United Nations has not imposed sanctions on oil trade
with Iran, but there are indications Washington may push new steps against
Tehran’s energy sector in the Security Council, which India joined as a member
on Saturday. India’s largest lender, State Bank of India, which oil companies
use to handle their trade payments, has stopped issuing letters of credit in
the absence of a payments mechanism, an official present at Friday’s meeting
said.
“If you don’t know how to carry out the promise how will you
open LCs (letter of credits). We have not been able to make spot payments. It’s
a long haul. The issue is complicated, so don’t expect an immediate solution,”
said the official, who declined to be identified.
“They (Reserve Bank of India) are equally at a loss because
they say payments through ACU are not getting settled,” the official said,
referring to the Asian Clearing Union which was used until last month to settle
payments.
He said even if RBI and the federal government suggest a
route for payment, it has to be accepted by Iran.
India is scrambling to secure alternate supplies to guard
against a supply disruption. The top local buyer of Iranian crude has sought as
much as 2.6 million barrels from the spot market, despite a long-term contact
with Iran.
Iran sells 400,000 barrels of oil a day to India, accounting
for about 13 percent of its crude imports.
