Iran opts for weak rupee for oil payment as other windows close

Sanction-hit Iran has opted to settle all payments against its oil sales to India, including the $1.53 billion that India owes Tehran, in rupees in the absence of an alternative channel of payment as the sanctions-hit nation cannot find an alternative payment channel, industry and government sources in Delhi said.

India has been paying for 45 per cent of oil imported from Iran in rupees and the remainder in euros through an arrangement with Turkey's Halkbank.

The Turkish bank, however, closed the window in February after the western powers slapped tougher sanctions on Iran to block oil revenues over its disputed nuclear programme.

Indian importers have not paid Iran for 55 per cent of the oil they bought since 1 April for lack of any payment mode. Iran has also been exploring ways of settling the payments through Russian rouble.

Since the Russian route also failed, Iranian exporters have asked their Indian clients to pay the entire amount in rupees, industry and government sources said.

India has been steadily reducing oil imports from Iran in the absence of a payment mode and under sanctions threat from the US and other western powers. Oil imports from Iran have declined by 27.4 per cent to 262,800 barrels per day (bpd) in 2012-13 from the year-ago, according to government data.

However, with the rupee ruling at its lowest against all major currencies, this mode of payment would add hugely to the government's external debt.

The two countries, meanwhile, have been trying to reduce oil payment dues by additional imports from India, including for re-export to Iran through value addition.