November 25, 2013 / 3:50 PM / 6 years ago

UPDATE 1-India ready to start Iran oil cash transfer after deal

* HPCL “actively considering” buying Iranian oil

* India, 2nd-largest buyer from Iran, owes it $5.3 bln

* Payments may resume under Turkey’s state-run Halkbank (Recasts lead, adds refiner HPCL and Shipping Corp quotes)

By Nidhi Verma

NEW DELHI, Nov 25 (Reuters) - India could step up imports from Iran next month and start transferring billions of dollars owed it for oil as early as next week following a deal to curb Tehran’s nuclear programme.

World powers agreed on Sunday to ease some of their sanctions on trade with Iran, which have slashed the OPEC member’s exports by more than half and cost it as much as $80 billion in lost oil sales since the beginning of 2012, according to White House estimates.

Since February, sanctions have prevented Iran from repatriating cash earned from its oil exports, crippling its economy by choking off its biggest revenue stream. Its biggest buyers - China, India, South Korea and Japan - have cut back on purchases.

The new agreement would let Iran receive about $4.2 billion in oil money from accounts held abroad if it fulfils commitments under the deal over the next six months.

India is Iran’s second-largest buyer and currently owes Tehran about $5.3 billion for oil shipments, according to government and refining sources.

The deal also lifts insurance restrictions on Iranian shipments, which could allow Indian refiner HPCL to import an extra 50,000 barrels per day (bpd) in December to March - about a quarter more than the daily average over the first nine months of 2013.

Sunday’s deal called for Iran’s oil exports to continue at current sanctioned levels of around 1 million bpd, and it was not clear whether this would include HPCL’s resumption of volumes.

“Till yesterday this crude was not under consideration because of insurance hurdles, but now because of this recent development ... Iranian crude has come into active consideration of HPCL,” the state-run company’s head of refineries, B. K. Namdeo, told Reuters.

Payments could potentially resume through Turkey’s state-run Halkbank, a route used until February when it was blocked by sanctions.

National Iranian Oil Company (NIOC) asked Indian refiners in mid-October to settle some of their payments in euros via Halkbank as soon as possible.

“Next week if it is possible, we will start making our payments,” said P.P. Upadhya, managing director of Mangalore Refinery and Petrochemicals Ltd, one of the Indian buyers of Iranian crude.

A government official also said that payments would be expedited once the payment mechanism via Turkey opens up.

“If that Halkbank route opens up ... rather than pushing this to a later date, perhaps this money will go to the Iranians sooner rather than later,” the official with direct knowledge of the matter said.

BANK TRANSFER

The United States in February asked Iran’s oil buyers to stop transferring payments to Tehran and instead keep the money in bank accounts in the currency of the importing countries.

Iran was able to use that money to buy only goods and services from the importing country. The cash in those accounts has quickly built up.

It is unclear how much Iran will receive from each country over the next six months under the terms of the deal. Banking and industry sources in South Korea and Japan said they were awaiting details of the weekend agreement before they could decide on how to transfer money to Iran.

South Korea has $5.56 billion stuck in bank accounts, with a similar amount held up in Japan since the beginning of the year, according to sources.

In China, Kunlun Bank, owned by China National Petroleum Corp, holds the Iranian oil dues, but it was not immediately clear how much is locked up.

China is Iran’s top oil buyer.

IRANIAN EXPORTS

The 1 million bpd ceiling on Iranian exports under the weekend agreement is sharply below the pre-sanctions level of around 2.5 million bpd and gives Iran very little room to boost sales. Its oil exports in the first nine months of the year have averaged about 1.08 million bpd, according to Reuters data.

Of the total, China bought nearly half, followed by India and Japan, which bought about 194,000 bpd each. South Korea purchased 137,000 bpd, while Turkey took about 100,000 bpd.

HPCL’s Namdeo said the refiner would resume crude imports if Iran continued to offer current conditions. He did not elaborate.

Industry sources have said Iran is offering free delivery, which saves on freight rates of up to $1 a barrel, and a small discount on the crude price.

India’s shippers, meanwhile, would be keen to resume voyages to Iran if they can now get full insurance, the Shipping Corporation of India said in an email, adding it would ask New Delhi to use Indian vessels.

Until now, buyers of Iranian oil had to show a continuous reduction in purchases to qualify for a six-month waiver from U.S. sanctions. The next review for most of the buyers is due soon. (Additional reporting by Choonsik Yoo, Meeyoung Cho and Jane Chung in SEOUL, Osamu Tsukimori in TOKYO, Florence Tan in SINGAPORE, Aizhu Chen in BEIJING, Frank Jack Daniel in NEW DELHI; Writing by Manash Goswami and Jo Winterbottom; Editing by Simon Webb and Jane Baird)

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