Business, Finance & Economics

India, Iran solve debt payments issue


An Indian petrol pump employee fills the tank of a motorbike at a petrol station in Amritsar on July 7, 2011. India imports about 80 percent of its crude oil and has been frantically seeking new fuel sources as its economy grows.



A day after vowing to push forward with a trilateral trade agreement with Iran and Afghanistan that could end the latter's dependence on Pakistan's ports, India finally hammered out a solution that will allow exporters to pay over $1 billion in unpaid oil dues, the Times of India reports.

The solution will help India continue to ignore U.S. economic sanctions on Iran for its alleged attempts to build nuclear weapons, which in turn may help New Delhi further leverage its warmish relations with Tehran to influence post-war Afghanistan.

TOI says:

On Wednesday, India and Iran agreed to a mechanism under which the authorities here would make the payment to Indian exporters, including project exports, on a net basis before settling the oil dues.

This would mean that anywhere between $1 billion and $2 billion would be deducted from the $10-12 billion meant to go to the Iranian central bank for oil payments, a senior official involved with the negotiations told TOI. This amount will then be distributed to Indian exporters.

The move is expected to benefit iron and steel, chemicals and rice exporters the most as they together shipped goods worth $1.3 billion during April-December 2010 when total exports from India to Iran were estimated at $2.1 billion. During this period, imports from Iran were estimated at $8 billion, of which $6 billion was crude petroleum.