Sources: Iran asks India for $1.5bn in oil payments

If the payments are approved, this could make India the third of Iran’s major buyers after Japan and South Korea

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Iran has asked India for $1.5 billion in back oil payments under the nuclear deal that provides Tehran some relief from Western sanctions, Indian sources with direct knowledge of the matter said on Thursday.

If the payments are approved, this could make India the third of Iran’s major buyers, after Japan and South Korea, to start processing frozen back payments. The payments are contingent on Iran holding to its agreement to start curbing its nuclear program.

Indian refiners are holding about $3 billion in payments due the Middle Eastern crude producer, one of the sources said. Other funds owed to Tehran are held in a rupee-denominated account at India’s UCO Bank.

Under the Nov. 24 agreement with six major powers, Iran won access to $4.2 billion of its oil revenues frozen abroad. The fund will be paid out in eight money transfers on a schedule that started with a $550 million payment by Japan on Feb. 1.

South Korea is set to make two payments in March totaling $1 billion, banking sources said on Wednesday, and the next scheduled tranche of oil funds would come on April 10.

“Out of the $4.2 billion they have sought $1.5 billion from us,” one of the sources said.

Tehran has already submitted requests to the United States for funds from each of its four major Asian buyers - Japan, South Korea, India and China, this source said.

The sources, who requested anonymity because of the sensitivity of the issue, said they did not yet know the timing and the banking mechanism to be used. But they said the payments will be from the dollar funds held by refiners.

Tehran is allowed to receive $450 million on March 1 if it satisfies targets set down in the November deal, according to the payment schedule. It can then receive two further tranches of $550 million on March 7 and April 10 without having to meet further conditions.

Payments from April 15 would be contingent on confirmation that Iran has kept to its commitment to dilute all of its 20 percent enriched uranium to no more than 5 percent enriched uranium.

Iran may want funds from India to be delivered into its central bank’s account in Switzerland or Germany, the industry sources said, even though refiners have taken steps to revive a previous payment route through Turkey’s Halkbank.

The four Asian buyers of Iran’s crude - China, India, Japan and South Korea - together cut oil imports from Iran by 15 percent to an average of 935,862 barrels per day (bpd) in 2013, according to government and industry data, as they sought to avoid falling foul of the U.S. and European Union sanctions.

Iran’s crude exports are around 1 million bpd and the November deal opens a door for lifting shipments in the future.