India is exploring ways to pay for Iranian oil imports in the face of tightening sanctions imposed by the United States and the European Union. Asian countries have been under pressure to cut oil imports from Tehran, but India says it will only follow sanctions
imposed by the United Nations and not those by individual countries or blocs.
Iranian oil now comprises about 12 percent of the India's supply.
Oil Minister Jaipal Reddy says New Delhi wants to buy as much oil as it can from Iran because the terms are very favorable. He says Iran’s attitude to India has been what he called “accommodative” despite New Delhi's repeated hurdles in paying for the crude.
“We have made our best efforts to make the payments," said Reddy, speaking on the sidelines of an energy conference in New Delhi on Monday. "In spite of difficulties the government of Iran has put up with us. It will be our effort in future to tap the Iran source fully.”
An Indian delegation visited Tehran last week to discuss how the two countries can continue their oil trade now worth about $12 billion annually.
During the past year India has struggled to pay Iran for the oil because of financial sanctions imposed by the United States.
Since last July, New Delhi has routed payments through a Turkish bank. But that method could be vulnerable to tighter U.S. sanctions that ban transactions with Iran's Central Bank and a ban on oil imports by the European Union.
New Delhi is likely to pay for part of the Iranian crude in rupees, with Tehran using the Indian currency to purchase imports from India. But Iran’s imports add up to less than one quarter of the money India would have to pay for the crude.
Other options are being explored. These include paying in yen because India has a currency swap arrangement with Japan. New Delhi could also step up investments in non-strategic infrastructure projects in Iran in return for the oil supplies.
An energy analyst in India, V. Raghuraman, says India is considering increasing its purchases from other oil suppliers, like Saudi Arabia. But he says New Delhi does not want to jeopardize its long standing relationship with Iran.
“The government has been thinking of diversifying the supplies and to see how we can reduce our dependence on Iran oil, but at the same time we have traditional relationships with Iran which goes beyond oil, so to that extent government cannot cut off its entire dependence on Iran.”
Oil Minister Reddy has reiterated that India will only follow sanctions imposed by the United Nations and not those by individual countries. New Delhi says it is complying with U.N. sanctions by banning all trade in goods and technology that could help Tehran’s
nuclear weapons program.
Asian countries such as China, India, Japan and South Korea are among the biggest customers for Iran’s oil.