After routing payments for crude oil purchases from Iranian oil companies via Turkey, the state-owned companies have now proposed an additional payment mechanism to the Central Bank (RBI) by routing such payments via Russia.
The country's largest importer of crude oil - Indian Oil Corporation (IOC) has proposed opening of two bank accounts in Gazprombank, Moscow in Russia.
"The proposal has been mooted following the visit of a high powered Indian delegation to Moscow, Russia comprising of officials from RBI, government of India, Union Bank of India and oil companies like IOC, HPCL, MRPL & Essar Oil during 13-15 July 2011 to hold discussions with three Russian Banks," a senior IOC official told HT. "It emerged out of the discussions that the payment to the National Iranian Oil Company (NIOC) is feasible through Gazprom Bank."
The official said that out of the two accounts, one shall be meant for transaction in euro while the other will be used for transactions in Russian rouble.
"The funds shall be transferred in euro/rouble from India to IOC's euro/rouble account with Gazprombank, Russia and from there, the payment is proposed to be made to BMJI's (BMJI is the central bank of Iran who is authorised to collect all payments for NIOC) account," the official added. "BMJI is maintaining account in the same bank (Gazprombank) and the exact modality of payment/ currency of payment is being finalised."
Gazprombank is the third largest Russian and the loan portfolio of the bank as on January 2011 is about Rs 1.59 trillion.
Until November 2008, payments by Indian companies to NIOC for crude purchases was being settled in US dollars. However subsequent to tightening of restrictions by USA on payments to Iran related entities, NIOC advised the Indian oil companies to settle the payment in euro as against the US dollars. This continued till February 2011 after which even the European banks fearing the apprehension of sanctions from USA, expressed their inability to handle euro transactions pertaining to NIOC.
As a result the settlement in euro under Asian Clearing Union (ACU) mechanism also got stalled. Under ACU, RBI used to settle the payments for the country towards the transactions with Iran. With the discontinuance of ACU mechanism by RBI, oil companies have been finding it extremely difficult to settle crude oil payments to NIOC, Iran.