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In Oil Payment Settlement, India Shows Its Middle Eastern Influence

Wednesday, Sept. 7, 2011

Ending a months-long dispute over oil payments, Iran has now resumed oil shipments to India, with Turkey stepping in as a key facilitator to resolve the impasse. Turkey's Halkbank is currently routing Indian oil payments to Iran that had been blocked by U.S. sanctions; according to reports, more than 80 percent of the $5 billion in accumulated arrears have been cleared. The tripartite arrangement, which comes amid regional tensions over Syria's future, indicates that India and its overall energy interests are emerging as a key variable in the strategic calculus of Middle Eastern capitals.

Previously characterized mainly by drift, the Indo-Iranian relationship had developed serious functional problems in the past 12 months. These were caused chiefly by India's refusal to settle its oil payments to Iran via the well-established Asian Clearing Union mechanism, due to concerns about violating U.S. sanctions targeting Iran's nuclear program. The result was a minor crisis that proved difficult to resolve. Initial attempts to channel some payments through the Frankfurt-based Europaeisch-Iranische Handelsbank had to be abandoned on account of U.S pressure. It was clear that a new and more stable arrangement was needed, since the India-Iran energy relationship is of vital importance to both sides. Iran is India's second-largest source of hydrocarbon imports, supplying some 400,000 barrels a day, while India is Iran's second-biggest customer for energy exports after China. ...

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