India Pays Off $5bn of Oil Debt

06 September 2011 - Which Way to Pay

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India Pays Off $5bn of Oil Debt

A sanction-related problem over the trading of oil has seen India accumulate $5 billion of Iranian debt. However, Central Bank Governor Mahmoud Bahmani told the official IRNA news agency on Sunday that the debt with Iran has been cleared:

"Although all the $5 billion of India's oil debt has been cleared, because of selling oil again Iran will always be a creditor of that country," Bahmani said, adding the payment was received in cash and not in kind through a bartering system.

"So far, Iran has not had a bartering system with India for receiving oil debts but if it happens it would be for those products which are of a high quality and are needed by Iran," he said.

Last month, New Delhi finally resolved a payment row with Tehran after more than six months of struggling to pay its dues amassed as a result of international banking sanctions on Iran over its suspected nuclear programme. As a consequence, various Asian and European banking channels used by New Delhi to pay Iran, Germany in particular, were seen to be closed off.

India is Iran's second largest oil client after China, and absorbs about 20% of the Islamic republic's crude exports. The South Asian country buys about 400,000 barrels of Iranian crude per day, with annual oil trade between the two nations standing at an estimated $12 billion.

Tehran has been subject to many international economic sanctions regarding its programme of uranium enrichment, which Western powers suspect has a military dimension, despite Tehran's repeated denials.

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