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Fri 4 Feb 2011 12:45 PM

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India settles oil dispute with Iran — source

State Bank of India to deal with EIH; India to certify that funds will not be used to boost nuclear programme

India settles oil dispute with Iran — source
NEW DEAL: The new mechanism for payments in euros through SBI is largely along lines suggested by Iran in January

India has resolved a payments dispute with Iran over their multi-billion
dollar oil business, an oil ministry source said, with New Delhi certifying
each deal to try to ensure funds do not go to Iran's nuclear programme.

With imports of 400,000 barrels per day (bpd) — 12 percent of daily needs —
at stake, India has softened its stance and allowed its largest lender State
Bank of India (SBI) to deal with the US sanction-hit European-Iranian Trade
Bank AG (EIH).

The Reserve Bank of India (RBI) said in December payments to Iran could no
longer be settled using a clearing system run by regional central banks,
winning praise from Washington which said the move would cut funds it claims go
to Iran's nuclear projects.

The new mechanism is largely along lines suggested by Iran in January.

But instead of Indian companies opening an account with Tehran-owned EIH
Bank in Hamburg, it will see the SBI organising the payments in euros.

The source said the Indian government will certify every transaction as a
bona fide payment towards import of oil from Iran and vouch that the money is
not being used by Tehran to boost its nuclear programme.

The US Treasury Department in September sanctioned EIH Bank for facilitating
billions of dollars of transactions with Iranian banks that the US and European
Union have blacklisted for aiding Iran's nuclear or missile programs.

“SBI has got [assurance] from the highest levels of the government to deal
with EIH. There is a backlog of around $2bn in payments,” the source said,
adding SBI had been asked to start using the mechanism immediately.

Four refiners — Mangalore Refinery and Petrochemicals Ltd, Essar Oil,
Hindustan Petroleum, and Indian Oil Corp — import crude from Iran.

“We have not yet heard it officially but if the issue is resolved then we
will renew our term contract with Iran,” said UK Basu, managing director of
MRPL, Iran's biggest Indian client that imports about 150,000 bpd of crude.

B Mukherjee, head of finance at HPCL, said: “I’m sure we shall be able to
renew the term [annual] deal seamlessly.”

HPCL imports about 60,000 bpd of crude from Iran.

The annual oil business between India and Iran runs from April to March.
Iran had not stopped shipments during the dispute.

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N.A.AHMED. 9 years ago

India i want to say as a proud INDIAN must be able to remove all obstacles for getting the free flow of OIL for Iran.India is bold enough to handle their issues.All other things are the vested interest of America.