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India-Iran oil impasse likely to end soon

business Updated: Dec 30, 2010 21:58 IST

Hindustan Times
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The Centre hopes to soon resolve the ongoing impasse with Iran over payments for crude oil imported from the sanctions-hit Islamic Republic.

An alternate settlement mechanism is being discussed at length with the finance ministry, said S. Sundareshan, petroleum secretary, after the Reserve Bank of India (RBI) stopped facilitating payments for Iranian crude imports. “Officials of the RBI and Iranian central bank are meeting in Mumbai tomorrow (to discuss alternative payment mechanism). Alternate mechanism payments could be in any currency, Japanese yen or their local currency.”

The RBI had said on December 23 that companies will be allowed to settle current account and trade transactions with Iran outside the Asian Clearing Union (ACU), a regional payment arrangement. This dismantled a mechanism used to complete payments for oil. Participants in the ACU settle transactions in either the US dollar or Euro. Iran has refused to sell oil under the new rules.

ACU, based in Tehran, settles trade transactions from Bangladesh, Bhutan, India, Iran, Nepal, Pakistan, Maldives, Myanmar and Sri Lanka.