Govt owes $8.8 billion to Iran for oil imports

The government owes about US $8.8 billion for oil imports from Iran, Minister of State for Commerce & Industry Nirmala Sitharaman said on Friday, as economic sanctions imposed over Tehran's nuclear programme have cut its access to the global banking system and hit its oil revenue.

Iran and Western powers are in talks to reach a framework agreement ahead of an end-March deadline to curb Tehran's most sensitive nuclear activities in exchange for a gradual end to sanctions on the OPEC member.

Domestic oil refiners settle 45 per cent of Iranian oil payments by depositing rupees in Tehran's commercial banks' accounts with UCO Bank, and withhold the remaining 55 per cent. Iran taps funds in the rupee account to import goods from the country.

The balance in Iranian commercial banks' accounts with UCO Bank was Rs 17,895 crore ($2.86 billion) as of March 16 while refiners owed Tehran US $5.943 billion as on February 28, Sitharaman told the Parliament in a written reply on Friday.

Refiners usually release funds for Iran from the 55 per cent payment as and when the West allows Tehran access to frozen funds overseas.

The government is keen to narrow its trade gap with Tehran, and has allowed Indian exporters to import non-sanctioned goods into the country for sale to Iran.

"The Ministry of Finance has decided that payments to the extent of $100 million per month for such third-country exports to Iran would be allowed from the 45 per cent rupees vostro account held with the UCO Bank," the minister said.

Payment over and above US $100 million per month would be met from the 55 per cent component held by refiners, she said.

India, which is Iran's top client after China, has been reducing its imports from Iran under pressure from Western sanctions.

(Reuters)