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Bid to iron out Iran oil irritants

New strategy

New Delhi, Dec. 13: Senior government officials and representatives of India’s oil companies will soon meet their Iranian counterparts to hammer out new ways of paying for oil supplies and to double imports from Tehran.

The two sides will also discuss ONGC’s reluctance to develop the Farzad gas field allocated some 11 years ago. ONGC wants the terms of the contract changed and has been negotiating on this. However, Iran contends that the delay has allowed the Saudis to pump out gas from their side of the undersea field in the Persian Sea. Gas and oil fields often cross international boundaries and delays by one side to exploit resources can prove costly.

After the US and European Union sanctions hit India’s trade with Iran, oil companies were forced to reduce Iranian crude imports to about 9 million tonnes (mt) a year, down from 21mt in the years prior to the sanctions.

However, earlier this month, the US and EU agreed to relax sanctions after Iran struck a deal with the five permanent members of the UN Security Council and Germany.

The Indian oil ministry wants to take advantage of this easing of sanctions to again raise imports from Iran back to the 21mt level. At the same time, the two sides will discuss new payment methods. India has yet to pay the Iranians about $2-2.5 billion in stuck payments. Besides, New Delhi will work out ways to buy the extra crude in euros through banks that allow transfers.

At present, about 55 per cent of payments are being made in rupees through Indian banks. However, Iran is understood to be reluctant to tie up additional crude imports in the Indian currency and have been seeking payments in euros.

“The percentage of crude paid for in rupees will thus fall and the percentage of crude paid for in euros will probably increase however crude supplies will double, hopefully at fixed long term prices which help both sides guard against the vagaries of oil market movements,” said officials.

India is keen to retain rupee payments at current levels as this helps them push the exports of rice, tea, pharmaceuticals, auto parts and farm machinery at a stable rate. India expects to sell goods and services worth $6 billion in the year ending March 2014, more than double of what it exported in the past year.

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