Oil crunch looms as RBI stifles Iran imports
India may face fuel supply shortages next month after Reserve Bank of India (RBI) stopped facilitating payments for Iranian crude imports, which make up for 12% of the nation’s oil needs.business Updated: Dec 29, 2010 23:38 IST
India may face fuel supply shortages next month after Reserve Bank of India (RBI) stopped facilitating payments for Iranian crude imports, which make up for 12% of the nation’s oil needs.
RBI apparently made this move without consulting the oil industry and the government. It means that the nation cannot import 10 million barrels of crude oil contracted from Iran for January, which cannot be replaced offhand.
“There is a huge crisis staring us,” an oil industry official said. “The RBI has without putting in place an alternative mechanism suddenly withdrawn from a system that was running fine since 1976.”
The RBI on December 23 said oil and other import payments to Iran will have to be settled outside the existing Asian Clearing Union (ACU) mechanism. Till 2008, payments under the ACU mechanism was done in US dollars but after the US imposed sanctions on Iran, the currency shifted to the Euro.
Recently the European Central Bank (ECB) asked RBI and other central banks of ACU to certify that the Euro was being used to import products not on US sanction list.
Apparently the RBI chose to scrap the entire system itself. Sources said now, top RBI officials will meet Iranian counterparts in 2-3 days in Mumbai to finalise a panel of banks via which payments can be made.