With less than a week to go for Indian Prime Minister Narendra Modi’s visit to Tehran on May 22, Indian officials are working hard to seal an agreement to repay $6.5 billion owed to Iran over the years when it was under sanctions.
The effort has run into a brick wall over the reluctance of European banks to process the payments, officials in the India’s Oil and External Affairs ministries have told The Hindu.
“We are trying our best to conclude the agreement during the week,” an official said, adding “We would have liked to transfer at least some part of our outstanding dues to Iran, before the PM’s historic visit.”
The repayment agreement is among a slew of announcements India and Iran hope to make during Mr Modi’s first visit to Tehran on May 22-23. While the other agreements are on track, officials say it is the hunt for the repayment channel to Iran that is keeping them on tenterhooks, despite several banks including the Danske bank of Denmark, Europaeisch-Iranische Handelsbank (EIH) of Germany, Central Bank of Italy and Halkbank of Turkey having been identified to carry out the transactions, and the RBI has identified corresponding banks in India.
New Delhi has repeatedly said it is keen to pay back Iran the $6.5 billion, most of it for oil transactions.
Instead, European banks blamed U.S. restrictions that still prevent financial transactions between American companies and Iranian entities.
U.S elections impact
Finally, say officials, the possibility of Donald Trump, or a Republican candidate winning the U.S. Presidential elections later this year is another dampener, as their campaigns have promised to scrap the nuclear deal with Iran hammered out last year, possibly revising the lifting of sanctions.
On Friday, a group of nine international banks including HSBC and Standard Chartered met with U.S. Secretary of State John Kerry in London, and refused to consider dealing with Iran until the Washington opens up for business after decades of sanctions on Iran.
At the same time last week, a team led by U.S. Deputy Assistant Secretary for Counter Threat Finance and Sanctions Andrew Keller met with officials in Delhi and Mumbai, including representatives of ONGC, Tatas, Hindujas, Essar Oil and Reserve Bank officials.
Confirming that the team had been invited by the government to “clarify their doubts” on moving ahead with Iran, officials told The Hindu that India is pushing for the U.S. to convince U.K. banks to allow the deal for $6.5 billion to be processed as a “one-off” transaction, even as they work on finding more permanent channels of doing business with Iran.
“It is ironic that four years ago, it was U.S. pressure that made us slash oil imports from Iran, and now it is the U.S. that has to ensure that we can do business with Iran,” a senior official said.
Other significant announcements are the signing of a trilateral trade agreement which includes Afghanistan that has already been finalised, an MoU for the development of the Chabahar port, progress on Indian exploration of the ‘Farzad-B’ gas oilfields. Millions of dollars in investments are also expected to be made by Indian companies for the “Free Trade Zone” in Chabahar.
India has approached Turkey’s Halkbank to facilitate the payment of $6.5 billion (about Rs 43,400 crore) it owed to Iran for the crude oil imported when western sanctions were in place on Tehran, an Iranian news agency reported.
“The Indian government is seeking to pay the $6.5-billion debt and is looking to prepare the banking activities. The receiving bank for this money will be Turkey’s Halkbank, and the money will be paid in euros,” news agency Fars quoted Indian Ambassador Saurabh Kumar as saying in Tehran. Iran has been demanding faster payment of oil dues and in euros. India has put the process into motion ahead of Prime Minister Narendra Modi’s May 22-23 trip to Iran.