India works with Iran on oil bills

The US and Europe have put strict sanctions on Iran, especially its oil and banking sectors, to dissuade the country from pursuing its nuclear programme, which they say is for military purposes. The sanctions have pushed up international crude prices over the past few months on fears of severe supply disruptions and threaten to derail the global economic recovery. The Iran debate has become a sore point for India-US relations, with Washington trying to exert pressure on New Delhi to curtail trade. But supplies from Iran are crucial for India, accounting for more than a 10th of its annual crude oil imports. Also yesterday, Krishna said that India is trying to diversify its sources of crude oil imports to cut dependence on any one region. He added that India's oil companies have faced difficulties in making payments for the crude they buy from Iran. The problem arose after India's central bank in December 2010 barred Iran-related payments from being processed through the Asian Clearing Union, a regional clearing house which the US said is opaque and could be used by Tehran to finance its alleged nuclear weapons programme. The government started payments through Turkey's Halkbank in August last year, but this route may be cut off by the sanctions as well. India's crude oil imports from Iran are expected to fall by 8 per cent in the current financial year that ends March 31, to 340,000 barrels a day. Additionally, Junior Oil Minister R.P.N. Singh told lawmakers in a written reply in the lower house of the parliament yesterday that India and Iran have agreed for part-payment of crude oil imports in Indian rupees. India yesterday showed no signs of trying to reduce oil purchases from Iran, saying instead that it is in discussions with Tehran to ensure an uninterrupted supply of crude oil and to better manage settlement of payments. "The government is studying the impact on India of the problems that have arisen due to imposition of sanctions against Iran," Foreign Minister S.M. Krishna said yesterday in a written reply to questions in the upper house of parliament. This comes just two days after the US State Department said 12 countries-including India and China-risk facing financial penalties this year because of their continued purchases of Iranian oil. But Krishna yesterday maintained India's position that trade with Iran won't be affected by the sanctions imposed by the US and the European Union against Tehran.