Russia may act as Iran payment intermediary for India

Indian oil refiners owe Iran around $6 billion at the moment. Source: AP

Indian oil refiners owe Iran around $6 billion at the moment. Source: AP

Under an oil swap mechanism, India would pay Russia for Iranian oil with the Russian Government assuming the risk of routing the funds to Iran, according to an Indian media report.

As a way of skirting global sanctions on Iran, India may use Russia as an intermediary to make payments for Iranian oil, the Indian Express reported on its website. Under an oil swap mechanism, India would pay Russia for Iranian oil with the Russian Government assuming the risk of routing the funds to Iran, the paper said.

Citing sources, the paper said the arrangement could be part of a package deal on the defence and energy sectors. At the moment Indian oil refiners deposit the payments for Iran in an Indian bank account and then Iran appropriates the money in back to back transactions in different currencies channelled through the Reserve Bank of India, according to the report. Indian oil refiners owe Iran around $6 billion at the moment.

The Indian Express added that the Iran payment agreement is part of a wider economic vision document that will be unveiled by Vladimir Putin and Narendra Modi when the Russian President visits India for the annual summit in December. “Both sides are working on a ‘vision document’ that will be released during the summit where energy security will be a highlight,” the paper quoted an official as saying. “It will be dealing with three major areas: gas pipeline; oil pipeline and most importantly getting the Iranian crude oil to India through Russia.”

In an interview to RIR in August, India’s Ambassador to Russia, P S Raghavan said he believed that the “two leaders will spell out their vision for the course of our bilateral cooperation over the next decade.” Those working on the bilateral summit have been tight-lipped about what the exact package will look like. It is also widely believed that Putin will visit the Kudankulam Nuclear Power Plant, the second unit of which should attain criticality in November.

Russia has been trying to bring Iran out of international economic isolation. In August, Moscow and Tehran signed an ‘oil-for-goods’ contract that widens economic cooperation, allowing  Russia to import 500,000 barrels of Iranian oil per day, in exchange for equipment and goods. Russia has the right to resell the purchased oil, but such plans are likely to be on cold storage with the subsequent fall in crude prices since the agreement was signed. 

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