The central banks of Iran and India have agreed that New Delhi's oil debt of $6.4 billion to Tehran will be settled through European banks. On Friday, May 6, Indian Oil Minister Dharmendra Pradhan told Reuters that Iranian oil buyers had been barred from settling payments through the global banking system since 2011 due to sanctions. The sanctions against Iran were lifted in January this year, and now the blocked funds from Iran's oil sales during the sanctions have been released. Initially, India settled 55% of its oil payments to Iran through Turkey's Halk Bank, but this bank was forced to cease operations for transferring Iran's oil payments due to U.S. sanctions in 2013. Since then, New Delhi has deposited 55% of Iran's oil payments into a foreign currency account in a bank in India, while the remaining 45% was deposited in rupees into Iran's account at UCO Bank in India. Iran was only allowed to use this money to purchase permitted goods from India. The Indian Oil Minister further stated that European banks would act as intermediaries for settling India's debts to Iran. Pradhan refrained from providing further details, stating that the country's finance minister is handling the matter. Reuters noted that currently, 130 billion rupees, equivalent to nearly $2 billion, of Iran's assets are held at UCO Bank in India. Government sources told Reuters that during the Indian Oil Minister's visit to Iran last month, Tehran officials requested that these debts be settled through Germany's AAH Bank, Turkey's Halk Bank, or Italy's central bank. An official from New Delhi told the news agency that India rejected settlement through the Turkish bank, but a senior official from Halk Bank stated that the bank has been conducting financial transactions with Iran since 2004 and can continue these operations under international law. Earlier reports indicated that Iran wanted to settle debts based on the value of the rupee at the time of oil shipments to India due to the depreciation of the rupee over the past few years. This week, reports emerged about India's agreement to pay 1.5% interest on its overdue debts to Iran. India has reduced oil imports from Iran, like other Asian customers, since 2012. However, Reuters reports that for the current fiscal year, which starts on April 1, India intends to purchase 400,000 barrels of oil daily from Iran. In this context, Iran is seeking to receive euros for its oil sales and claims. India approved a $150 million project for the development of Chabahar port. Shell has paid its $2 billion debt to Iran. Iran has 'stopped' selling oil to India in exchange for rupees or goods. Asia increased oil imports from Iran by 50% in March.
India to Settle Iran's $6 Billion Debt Through European Banks
India and Iran have reached an agreement for India to settle its $6.4 billion oil debt through European banks, following the lifting of sanctions against Iran. This development is significant as it marks a potential normalization of financial relations between the two countries after years of restrictions. The agreement also indicates India's renewed interest in increasing oil imports from Iran.
👥 Key Players
📰 What Happened
India has agreed to settle its $6.4 billion oil debt to Iran through European banks, following the lifting of international sanctions against Iran. This agreement marks a significant step in normalizing financial relations between the two countries.
- India's oil payments to Iran were previously restricted due to sanctions.
- European banks will now facilitate the settlement of India's debt to Iran.
💡 Why It Matters
📚 Background
Sanctions against Iran severely restricted its ability to receive payments for oil exports, impacting its economy. The lifting of these sanctions has opened pathways for financial normalization.
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