Iran seeks euro payment for new and pending oil sales

According to Reuters, converting oil sales to euros makes sense because Europe is now one of Iran’s biggest trading partners.
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NEW DELHI (Reuters) – Iran is looking to recover tens of billions of dollars in euros from India and other buyers of its oil and is also selling new oil in euros as it seeks to reduce its dependence on the dollar after the latest month-long sanctions easing.

A source at the state-owned National Iranian Oil Company (NIOC) told Reuters that Iran recently denominated in euros for its oil contracts with companies including France’s Total, Spanish refiner Sepsa and Russia’s Lukoil’s trading arm, Litasco. will charge a fee.

“In our invoice we have mentioned a clause that our oil buyers will have to pay in Euros, taking into account the exchange rate against the dollar at the time of delivery,” the NIOC source said.

Lukoil and Total declined to comment, while Sepsa did not respond to a request for comment.

The person with direct knowledge of the matter said Iran has also told its trading partners that it owes billions of dollars, which it wants to pay in euros instead of US dollars.

Iran was allowed to recover some of the money frozen under US-led sanctions in currencies other than the dollar, such as the Omani riyal and UAE dhiram.

Shifting oil sales to the euro makes sense as Europe is now one of Iran’s biggest trading partners.

“Many European companies are rushing to Iran for business opportunities, so it makes sense to get revenue in euros,” said Robin Mills, chief executive officer of Dubai-based Qamar Energy.

Iran has been pushing for the euro for years to replace the dollar as the currency for international oil trade. In 2007, Tehran failed to persuade OPEC members to give up the dollar, which its then-president Mahmoud Ahmadinejad called a “worthless piece of paper”.

The NIOC source said Iran’s central bank had put in place a policy when the country was embracing its disputed nuclear program to conduct foreign trade in the euro.

“Iran turned to the euro and canceled trading on the dollar for political reasons,” the source said.

Euro trading impulse

Iran has the world’s fourth largest proven crude oil reserves and expects a rapid increase in production, which could lead to tens of billions of euros in new oil business.

Iran’s insistence on paying in euros instead of dollars is also a sign of an uneasy conflict between Tehran and Washington, even after most sanctions were lifted last month.

US officials estimate that about $100 billion (£69 billion) of Iranian assets have been stashed abroad, about half of which Tehran could receive as a result of sanctions relief.

It is not clear how much of these funds are oil tariffs that Iran would like to get back in euros.

India owes Tehran about $6 billion for oil distributed during the sanctions years.

Last month, the NIOC’s director general for international affairs told Reuters that Iran “would like to receive (oil’s money owed) in some foreign currency, which for now would be the euro.”

Sources in the Indian government have confirmed that Iran intends to make payments in euros.

Indian and Iranian sources said Tehran asked to be paid using exchange rates at the time of delivery of the oil, as well as interest for those late payments.

An Indian government source said Indian officials are working on a mechanism that could involve local banks United Commercial Bank (UCO) and IDBI Bank to handle payments to Iran.

UCO CEO RK Takkar said the bank is involved in payments to Iran, but did not specify whether there were plans to change the payment mechanism. IDBI CEO Kishor Kharat could not be contacted.

India could try to resume payments through Turkey’s HalqBank, a channel it stopped using in 2012, or by direct transfers to Iranian banks through the global SWIFT transaction network.

Iran is now again connected to international creditors through SWIFT, with the NIOC source saying it was easy for Tehran to add in whatever currency it wanted to pay, adding: “And we want the euro.”