Iran, India resolve oil trade dispute

Iran said an oil trade dispute with India had been settled by changing the currency for payments, deputy oil minister Ahmad Khaledi was quoted as saying by Fars news agency on Friday.

"By changing the currency for oil transaction between Iran and India the problem was solved," said Khaledi.

Central bank officials from Iran and India met on Friday in Mumbai in an effort to keep their oil trade running.

The Reserve Bank of India (RBI) said last week that oil trade payments to Iran could no longer be settled using a long-standing clearinghouse system run by regional central banks, and Tehran has refused to sell oil outside the old set-up. This week the RBI extended the move to apply to all current account transactions.

The White House wants to convince governments to stop dealing with Iran because of its nuclear program and praised the move. The RBI's announcement came less than two months after President Barack Obama's trip to India, where he pledged to help boost New Delhi's global role.

India and Iran could agree to settle deals in Iran's rial or another currency instead of the American dollar, the Indian Oil Secretary S. Sundareshan suggested on Thursday. Payments could also be routed through a third country's central or commercial bank.

According to a report published in Aljazeera, Iran on Thursday said it will not sell oil to India, unless payments for such transactions are guaranteed by the RBI.

On its part RBI said that all such transactions with Iran must be settled outside the Asian Clearing Union (ACU).

India buys about 400,000 barrels per day of Iranian crude, worth roughly $12 billion a year. The payments are made to Tehran via the ACU, a system created in the 1970s by central banks in South Asia and Iran to clear trade payments between them.

The ACU includes the central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka. The system is used by member nations' central banks to settle bilateral trade.