ran, one of India's major sources for crude oil, is insisting on payments in gold from highly energy deficit import countries such as India and others. There is no confirmation whether India, or for that matter China, has acceded to this otherwise ancient and time tested method of payment. Delhi has made it clear that it would not be taking any steps that would bring unnecessary bad publicity for India over dealing with Tehran, particularly in the Western circles beyond a limit. However, at the same time, India is also keen on passing on the message that it cannot afford to completely cut off decades old petroleum relations with Iran.
There are whispers in the international oil community that India might have already agreed to make parts of the payments in gold to Iran, but informed sources in petroleum circles in Delhi refuted any such suggestions, adding that India is a big importer of gold and "pays through its nose" for importing the yellow metal.
"Why should India pay in gold for importing crude oil when there is plenty of crude oil available for India to buy against the US dollar?" asked a highly placed source in the petroleum sector who did not wish to be identified. "India is very keen to maintain solid energy relations with Iran, but not at the cost of gold."
India's last payment method to Iran, via Turkey's Halbank was closed as well because of increased financial sanctions by the United States. India owes Tehran roughly $1 billion in dues. Meanwhile, there are reports that there might be some sort of solution over Iran's standoff with the West before the US pulls out of Afghanistan in 2014. And that the road to diplomacy involving several countries, including India and Pakistan, is on overdrive to achieve the same. In September 2012, the Ministry of Finance had declined Iran's Parisian Bank to open a branch in Delhi, which was to facilitate Indian oil payments. Prior to this, the ministry had banned two other Iranian banks after it received a caution from the Financial Action Task Force (FATF), of which India is a member since 2010.
Western oil companies have already started positioning themselves to move into Iran as soon as the diplomatic green shoots over the West-Iran standoff solutions become visible on the horizon. At the time when Western oil companies are short of oil acreages where they can produce oil cheaply.
In some places in the West the cost of producing oil can be as high as $65 per barrel against the cost of oil in Iran, which can be as low as $7 per barrel. On the back of such numbers, Western oil giants are reportedly pressurising the Obama administration and the European Union to find a diplomatic solution at the earliest.