Indian refiners set to pay $700 mn oil dues to Iran

Indian refiners, including MRPL and Essar Oil, will reportedly pay Iran the first tranche of $700 million on Wednesday to clear nearly a tenth of outstanding oil dues.

Mangalore Refinery and Petrochemicals Ltd (MRPL) will pay $300 million and a similar tranche may follow next month. Essar Oil will clear a little over $300 million in dues on 30 September, The Economic Times reported its sources as saying.

 HPCL-Mittal Energy Ltd (HMEL) and Hindustan Petroleum Corp Ltd (HPCL) will be the other refiners to clear their part of the outstanding on Wednesday.

The sources said the refiners will deposit rupee equivalent of $700 million in Kolkata-based UCO Bank which will then transmit the money to Reserve Bank of India (RBI).

RBI will make arrangements for its onward remittance to Iran.

Indian refiners owe over $6.5 billion in past oil dues to Iran and payments are being made in a calibrated manner so that there is no pressure on exchange rate, the source said.

US Treasury's Office of Foreign Assets Control last month approved Indian refineries paying $1.4 billion out of the $6.5 billion in past oil dues to Iran.

No modalities of the second installment of $700 million have yet been worked out, the source said.

The remaining $4 billion would be cleared in tranches after payment channels are cleared.

The payments are being made after the July nuclear deal that Tehran struck with western powers, allowing for suspension and eventual termination of sanctions (See: Markets cheer as Iran, West clinch nuclear deal).

 Sanctions will be lifted after the International Atomic Energy Agency verifies that Iran has implemented its commitments to cease nuclear programme.

Until then, the interim sanctions relief format of November 2013 would continue.