Essar Oil makes USD 500-mn payment to Iran via new channel

New Delhi, Jun 29 ()

Essar Oil

has paid USD 500 million to

Iran

via a new payment channel opened recently to clear one-fifth of its outstanding. Indian refiners are using Germany-based EIH bank to help clear past oil dues to Iran. Industry sources said Essar Oil, which owed about USD 2.6 billion in past dues, paid USD 500 million. Mangalore

Refinery and Petrochemicals Ltd

(

MRPL

) and

Indian Oil Corp

(

IOC

) have paid over USD 1 billion. Sources said MRPL, which owed Iran USD 2.6 billion before the payments started last month, paid USD 300 million this month on top of USD 500 million it paid in May. IOC cleared another USD 30 million over and above the USD 250 million it paid last month. The company owed USD 560 million before the payment cycle started. Hindustan Petroleum (HPCL) had paid USD 17.5 million out of its outstanding USD 23 million. Its joint venture with

Mittal Energy - HMEL

- owes another USD 60 million. Sources said the payments last month were routed through

Union Bank of India

, which in turn transmitted the money to

National Iranian Oil Co

(

NIOC

) through

HalkBank

of

Turkey

. This month, the refiners are using

State Bank of India

(SBI), which transfers the euro to NIOC through EIH. The balance dues will be cleared in 2-3 months, they said, adding that the oil companies have been advised to buy foreign currency in a calibrated manner to avoid a run on the rupee. The payments made in May and this month are the first by Indian refiners in a foreign currency since lifting of sanctions against Iran in January this year. RBI is co-ordinating the repayments, they said. With sanctions blocking banking channels, Indian refiners have since February 2013 paid nearly half of the oil import bill in rupees while keeping the remainder, pending opening of payment routes. The refiners had last paid USD 700 million to Iran in October using a limited window provided by the US to clear some of the outstanding using the dollar. At that time, Essar Oil had paid USD 338 million while MRPL had remitted USD 299 million. IOC had paid another USD 60 million while HPCL paid USD 3 million. The dues to Iran on crude oil that refiners buy have accumulated as western sanctions blocked payment routes since 2013. Since February 2013, refiners like MRPL and Essar Oil have been paying 45 per cent of dues on purchase of crude oil from Iran in rupees through

UCO Bank

in Kolkata. The remaining has been accumulating, pending finalisation of a payment route and mechanism. After the lifting of sanctions, Iran has scrapped the 45:55 payment mechanism and is billing Indian refiners in euros since April. ANZ ABI