India, Iran held discussion to end impasse on mode of crude oil payment

India, Iran held discussion to end impasse on mode of crude oil payment

New Delhi: India and Iran held "detailed and constructive discussions" on ways to resolve the long pending impasse over the settlement of bilateral oil payments, a government statement said on Wednesday. "Both the sides agreed to continue their engagement in the matter," it said.

The Indian delegation to the two-day talks was led by R. Gopalan, secretary, Department of Economic Affairs while the Iranian delegation was headed by Hamid Borhani, deputy governor of Central Bank of Islamic Republic of Iran.

The two countries have been trying to resolve the problem over the method of payments since late 2010 when India decided to discontinue payment through the 35-year-old Asian Clearing Union (ACU) system.

Established in 1975, the ACU system is used by India, Iran, Bangladesh, Bhutan, Nepal, Pakistan, the Maldives, Myanmar and Sri Lanka to reduce foreign exchange spending on account of transaction costs. Under the ACU system, the final payment is made after coming to a net settlement of all dues towards imports and receivables for exports.

The “netting off" involves all transactions from all the nine member-countries, so individual transactions are not treated separately.

It follows international sanctions on Iran after the Islamic republic refused to end its nuclear enrichment programme that Tehran says is for peaceful purposes but Western countries say is a cover for a nuclear weapons’ programme. Iran is one of the largest suppliers of oil to India, the world’s second fastest growing major economy, and the trade is crucial for both countries.