(EnergyAsia, August 24 2011, Wednesday)— Iran said it will continue to supply crude oil to India after receiving the first instalments of some five billion euro owed for cargoes shipped to several Indian refiners since last December. (US$1=0.70 euro).
The two countries had been locked in a heated argument over India’s failure to pay for an average of 400,000 b/d of crude as its refiners could no longer use traditional banking channels to make payments due to the UN-backed economic sanctions against Iran.
Iran, which supplies 12% of India’s oil demand, had threatened to cease shipments from August after the Reserve Bank of India stopped clearing payments following pressure from the US government.
While Iran risks significant financial losses if it carries out its threat against its second-largest oil customer, the supply disruption would have posed a bigger threat to the Indian economy which is battling to contain runaway inflation.
Shortly after, Indian Finance Minister Pranab Mukherjee announced that India had found a way to clear the debt and to resume making regular payments to Iran for on-going supplies.
Mangalore Refinery and Petrochemicals (MRPL), which imports 142,000 b/d of Iranian crude, opened up a channel through the New Delhi branch of Union Bank of India and Turkey’s state-owned Turkiye Halk Bankasi (Halkbank) to pay the National Iranian Oil Company (NIOC) in euro.
While Iran has not been barred from supplying crude to other countries, UN sanctions have largely prevented its use of international banks and the financial system to conduct trade.
Saudi Arabia said it was ready to supply India to make up for the loss of Iranian crude.