India plans to pay Iran about $1.65 billion in past dues for the purchase of oil through UAE's central bank, as part of an interim nuclear deal that allowed Tehran to access $4.2 billion in blocked crude oil funds.
The payment will come after a delay of over a month, caused by the failed talks between Iran and six world powers over its nuclear program. As part of the deal, India would pay $550 million to the Central Bank of the United Arab Emirates on June 16 and keep ready another $1.1 billion in two equal payments to be made at a later date, for the oil it purchased from Iran. The move comes after Iran resumed talks Tuesday about its nuclear program with the six world powers -- the U.S., UK, France, Germany, Russia and China -- in Vienna.
While Iran continues negotiations about its nuclear program, the payment from India will mark the first of the last three oil payments to Iran through regular banking channels since the imposition of economic sanctions in 2012. As part of the sanctions, Iran was barred from using regular banking channels to receive oil payments, crippling the country's economy, which relies heavily on oil revenues.
The $4.2 billion in crude-oil funds, which Tehran is to receive in eight installments in six months, were made accessible to the country in November under a deal that demanded a halt to its nuclear programs. Iran has so far received payments of up to $2.55 billion till date through four channels from Japan and one from South Korea, according to Indian Express, a local newspaper.
Under the deal's terms, UAE's central bank will hold a rupee account to receive the funds from India. The rupee funds will then be converted to dirhams and transferred to Iran's central bank. And, once India's central bank, the Reserve Bank of India, receives confirmation from the Iranian central bank, the RBI will transfer an equivalent amount in dollars to Iran. The RBI will later settle its dollar purchases with the money in the rupee account created by UAE's central bank.
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"It is indeed a complex mechanism but it has been devised to bring in transparency in the money transfer to Iran," Reuters reported, citing a source.
India, which imports nearly 4 million barrels of oil a day, has reduced oil imports from Iran to 5.7 percent in 2014, down from Iran's two-thirds contribution to India’s overall oil imports five years ago.
"The respective payments by the four refiners will be same for the first two installments. Numbers for the third installment are yet to be worked out," Reuters reported, citing sources.