New Delhi: India’s BPCL is unable to pay for crude it is buying from Iran, three oil industry sources told Reuters on Thursday, in yet another sign Asian buyers are struggling to do business with the Islamic Republic.
India is Iran’s second-largest crude buyer, taking about 341,000 barrels per day (bpd), or about 13% of Iran’s 2.6 million bpd of exports in trade worth about $12 billion a year.
At around 20,000 barrels a day, Bharat Petroleum Corp (BPCL) buys only a fraction of that crude, having started a new long-term contract to buy the oil in September.
To pay for the crude, BPCL applied for an account with Turkey’s state-controlled Halkbank, which would allow it to use the same payment channel as other Indian refiners, but the bank turned BPCL down, the sources said.
BPCL declined to comment on Thursday.
Indian state-run refiners began using Halkbank to pay in July after India’s central bank – Reserve Bank of India (RBI) -- scrapped the payment clearing method they had used until then.
“We are continuing our oil purchases from Iran and we are looking at appropriate mechanisms for dealing with the payment with all possible avenues,” India’s foreign secretary, Rajan Mathai, told reporters.
Refiners have expressed concern the Halkbank payment route may be undone by new financial sanctions the US and the European Union (EU) are threatening to slap on Iran over Tehran’s nuclear programme.
Mathai declined to comment if the Turkey arrangement may be coming to an end.
“I think that is a matter of speculation, I would not like to comment on it,” he said. “As of now, this is a mechanism which is working.”
Other Indian refiners MRPL, Essar Oil, HPCL and IOC have to date heard nothing to suggest their payments to Iran via Halkbank have been stopped, sources at the refiners said. Their cash is transferred from accounts with India’s Union Bank to Halkbank.
“Union Bank has no problems with BPCL, but Halkbank has refused to open a bank account for BPCL,” one of the sources said.
India is exploring the option of paying for Iranian oil imports through Russian banks, a senior government source said on Thursday, adding that Prime Minister Manmohan Singh could raise the issue when he meets Russian leaders this week.
“This is being considered in light of sanctions being considered (against Iranian oil trade) by some countries,” said the source, who asked not to be named.
The US House of Representatives passed legislation on Wednesday to expand sanctions on Iran, cracking down on a wider range of energy issues and closing some loopholes in existing energy and financial sanctions.
The US, Britain and Canada announced new measures against Iran’s energy and financial sectors last month and France proposed “unprecedented” new sanctions.
BPCL’s annual deal is to receive 1 million tonnes of crude per year from Iran. It took delivery of a 140,000-tonne cargo in September and October and another of 130,000 tonnes in November.