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On Sunday, a new deal was made with Iran in which world powers agreed to ease some of the sanctions against Tehran in exchange for a reduction in stockpiles of enriched uranium and more transparency at nuclear facilities, amongst other things.
Iran’s economy has suffered greatly at the hands of the sanctions, losing an estimated $80 billion in oil sales since 2012, but the recent deal allows Iran to receive about $4.2 billion in money held in foreign accounts, based on the fact that it complies with its side of the bargain. India, which owes Tehran about $5.3 billion for unpaid oil shipments is now looking for a means to begin paying this debt back as early as next week.
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India is Iran’s second largest customer after China, and whilst the sanctions have been in effect to prevent foreign banks from interacting with Iranian banks, Iran has been unable to receive any money for the oil shipments it has been making.
In February the US told Iranian oil customers to stop transferring any payments to Tehran and instead keep the money in domestic bank accounts in their own currency.
Countries around the world are holding bank accounts full of money owed to Tehran, and once this cash starts to flow back to Iran, the country’s economy will be given some much needed relief. Banks in South Korea and Japan are also waiting to see how much money they will be able to deliver to Iran, and when.
Before the February blockade on financial transactions, India was making its payments via the Turkish state-run bank, Halbank, and may well resume with this route once again. In October, the National Iranian Oil Company asked its Indian customers to begin making some payments in euros via Halbank as soon as possible.
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P.P. Upadhya, the managing director of Mangalore Refinery and Petrochemicals Ltd, told Reuters that “next week if it is possible, we will start making our payments.”
Also included as part of the deal between Iran and the P5+1 (UK, US, Russia, China, and France, plus Germany) is a lift on the restrictions preventing Iranian ships to find insurance. This will allow more shipments from Iran, enabling HPCL, an Indian refiner, to import and extra 50,000 barrels of oil a day, about 25% more than it was able to import during the first three quarters of 2013.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com