Iran to take SWIFT route to unblock $6-billion India bills

Iran is likely to reconnect to SWIFT international payment system in a day or two, paving the way for getting about USD 6 billion of blocked oil payments from India. Belgium-based SWIFT, which provides banks with a system for moving funds around the world, has begun the process to allow the Persian Gulf nation to use its network for money transfer.

“Iran will reconnect with SWIFT in a day or two,” a top official said. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) had in February 2012 expelled Iranian banks to shut down Tehran’s main avenue for doing business with the rest of the world.

This blocked payment channels and Indian refiners could not pay for all of the oil they buy from Iran. “With reconnection with SWIFT, payment channels will reopen in about a weeks time. Following this, the money that Indian refiners owe Iran will begin flowing,” he said.

Essar Oil owes about USD 2.5 billion in past payments while Mangalore Refinery and Petrochemicals Ltd (MRPL) has to pay USD 2.4 billion. Indian Oil Corp (IOC) owes Iran USD 540 million. SWIFT is reconnecting with Iran following lifting of sanctions against the Gulf nation. With SWIFT access, Iran’s economy will truly be open for business.

SWIFT is the system through which financial institutions move money electronically. Every major global financial institution uses SWIFT. The official said Iran wants its past dues in Euros.

Tehran has told Indian refiners that the three-year old mechanism of paying 45 per cent of oil import bill in rupees and keeping the remaining 55 per cent pending for payment channels to clear will come to an end.

Iran will be opening or re-activating euro accounts with Indian banks and would like to have the money transferred from refiners into these accounts. The Persian Gulf nation is talking to State Bank of India (SBI) for the purpose and has already opened an account with IDBI.

Also, it wants settlement with India through the Asian Currency Union (ACU) and has written to the Reserve Bank of India (RBI) in this regard, he said. National Iranian Oil Company (NIOC) would ask buyers of crude in India to open Letters of Credit (LCs) in favour of Central Bank of Iran with SBI as was the case in past, he said adding settlement could be done through the ACU and IDBI would be used for the purpose.