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Iran, India officials meet to discuss oil exports, payments Pakistan, Tehran agree to speed up gas pipeline project

NEW DELHI, Dec 10, (RTRS): Indian and Iranian officials are meeting this week to discuss how to unlock the first oil payments to Iran since the United States and other world powers eased sanctions last month in exchange for curbs to Tehran’s nuclear programme. Last month six world powers and Tehran reached an interim deal that provided limited relief to Iran from economic sanctions, opening the way for some oil payments to resume. The deal is a chance for Iran’s new leadership to revive the country’s economy, plagued with high inflation and a weakened currency since being cut off from the global financial system after sanctions were imposed in 2012.

The West believes Iran is trying to make a nuclear bomb, while the Middle Eastern nation says its nuclear programme is for power generation. India and Iran are to discuss how to restart oil payments in foreign currencies, including a plan to process partial payments for oil in euros through a Turkish bank, two government sources said. A delegation of Iranian officials led by Gholamali Kamyab, deputy governor at Iranian Central Bank, is in India until Dec. 13. The group met officials of the finance ministry and Reserve Bank of India on Tuesday. Arvind Mayaram, a senior official at India’s finance ministry, said that for now, India would not release dollar payments it was holding back from Iranian imports.

He said the meeting had mostly focused on the implications of the new deal on issues of insurance — a problem for shipping under the sanctions — as well as ways to increase oil imports from Iran and exports from India. Iran had asked Indian refiners in mid-October, before the deal was reached with world powers, to resume paying for oil imports in euros through Turkey’s Halkbank but the refiners are still seeking direction from the government.

Payments
India started settling 55 percent of its payments for Iranian crude in euros through Halkbank in mid-2012. The rest was settled in rupees through India’s UCO Bank. But the Halkbank route was halted in February this year when fresh sanctions prevented Iran from repatriating cash earned from oil it has been able to sell, crippling its economy by choking off its biggest revenue stream. At the end of November Indian refiners owed about $2.2 billion for partial payments to Iran, refinery sources said. About $3 billion worth of rupees, paid by refiners are lying in Tehran’s account with UCO Bank, Arun Kaul, chairman of the bank said after the meeting.
India is Iran’s second-largest buyer but its oil imports from the OPEC member plunged to about 170,000 bpd in the April-October period, a decline of about 40 percent from a year ago, tanker arrival data made available to Reuters showed.

A finance ministry official said this week India would continue to settle part of its oil payments in rupees through UCO Bank until receiving further information on the lifting of US and EU sanctions on Iran. India wants to fix its trade imbalance with Iran, tilted now in favour of Tehran because of oil purchases. New Delhi wants to boost its exports to the Islamic nation by letting Iran pay for goods in the billions of rupees it has in UCO Bank. Indian exports to Iran are expected to touch $6 billion in the year to March 31, 2014, almost double last fiscal year’s $3.2 billion, said Ajay Sahai, director general, Federation of Indian Export Organisations (FIEO).

Meanwhile, Pakistan announced on Tuesday it had agreed with Iran to speed implementation of a much-delayed gas pipeline project designed to link Iran’s giant South Pars gas field with consumers in South Asia. The United States opposes the $7.5-billion project because it could violate sanctions imposed on Iran over nuclear activities Washington suspects are aimed at developing an atom bomb, although Tehran denies this. In an announcement following a breakthrough pact between Iran and global powers, Pakistan said both sides would speed up work to finish construction of the pipeline. “It was also agreed that a meeting will be held shortly between the experts of both sides to review parameters for accelerating work on IP Gas pipeline,” the foreign ministry said in a statement. It did not say when the pipeline would be completed.

Iran agreed with six world powers last month to curb its nuclear programme in return for some easing of sanctions in a landmark pact seen as a first step towards resolving a decade-old dispute over the Middle Eastern nation’s nuclear programme. Pakistan needs the pipeline from neighbouring Iran, which sits on the world’s largest reserves of gas, to alleviate severe energy shortages that have crippled the economy. But it has made little progress on its section of the pipeline for lack of funds and warnings it could be in violation of US sanctions. Iran, for its part, has spent hundreds of millions of dollars and nearly completed the 900-km (560 mile) pipeline to the Pakistan border. Under the contract, Iran would export 21.5 million cubic meters of gas per day to Pakistan from next year.

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