India receives $12 billion in oil imports from Iran a year.
But recently, India is facing $2 billion in debt for these imports.
On Friday, Indian officials announced that Iran could cut India off from these imports until payments can be made.
In a letter received by Indian refineries, the National Iranian Oil Company (NIOC) warned that payments for oil must be made or India faces the risk of losing Iranian oil imports for August.
Indian refineries had been purchasing Iranian oil on credit since dropping their old payment mechanism.
The Reserve Bank of India is still working on a new payment mechanism.
Iran would have trouble simply dropping India as an oil client, however. India is the second-largest buyer into Iranian oil.
With the West skeptical of Iranian actions as far as their suspected nuclear weapons program, Iran is losing clients.
And this is going to become even more of a problem as Saudi Arabia increases their exports, as decided at last month’s OPEC meeting.
Saudi Arabia, India’s largest oil supplier, has already offered an extra 2.6 million barrels to India.
The NIOC really doesn’t want to lose India as a client. Relations are generally good, as a source told Reuters, but Iran just can’t afford to lose any more money from the deals.
A source from India’s Mangalore Refinery and Petrochemical Ltd (MRPL) told Reuters, “We hope that a decision on a new payment mechanism would be taken by mid-July.”
It would be necessary on both ends for a quick decision to be made. Neither can really afford to lose the business deal.
That’s all for now,