New Delhi: After threatening to snap oil supplies, Iran on Sunday said a payment row over crude exports to India has been resolved after Indian refiners began paying for the oil they buy through a Turkish bank.

 The Iranian Oil Ministry's website, SHANA, quoted National Iranian Oil Co (NIOC) Managing Director Ahmad Qalebani as saying that "the problem of India payments for imported oil from Iran has been solved."

Refiners like Mangalore Refinery and Petrochemicals Ltd (MRPL) have opened rupee accounts in the New Delhi branch of Union Bank of India, which will route euro payments to state-owned Turkiye Halk Bankasi (Halkbank) in Istanbul.

Halkbank will then transfer that money to the account of NIOC, sources involved in the process said here.

MRPL and private sector refiner Essar Oil last week transfered a small payment to Halkbank to test the conduit, which will be used to clear over USD 7 billion in outstanding dues to Iran that have accumulated.

Indian Oil (IOC) and Hindustan Petroleum (HPCL) will make payments next once the test payments are successful.

Qalebani on the website was quoted as saying that "part of the arrear payments would be settled this week."

SHANA quoted NIOC's Director for International Affairs Mohsen Qamsari saying that "the two sides had reached an agreement on the arrear payments... related bank accounts have been announced to Indian side and the amount deposited into our accounts would be revealed by reopening the international banks on Monday."
He said Iran's 400,000 barrels per day of oil exports to India were "going on as usual." "Following bilateral negotiations, the two sides agreed to settle the outstanding bills as soon as possible," the NIOC Managing Director said.
The Reserve Bank of India (RBI) had on December 23 last year scrapped a long standing mechanism of paying for Iranian trade through a clearing house system run by regional central banks without assigning any reason, winning praise from the US, which is using sanctions to force Tehran to halt its nuclear programme.
Indian refiners in February made one big payment through Germany-based Europaeisch-Iranische Handelsbank (European-Iranian Trade Bank). However, soon after the payment was made, the US persuaded Germany to discontinue routing the payments.
Sources said Iran, which has been supplying some 400,000 barrels of oil per day on credit since the RBI move, provided no plans for shipping oil in August. Iranian oil makes up for 12 percent of India's oil imports.

 Iran had on June 27 written about stopping supplies from August if the dues are not paid.
Qamsari said, "A notice had been sent to Indian indebted oil refineries, but this did not mean stoppage of oil exports to the country."
"NIOC has no plan to suspend oil exports to India," he said, pointing to good relations with India. Indian refiners had tapped Saudi Arabia, Kuwait and Iraq to cover for any supply disruption from Iran.

MRPL is the largest buyer of Iranian crude, at 142,000 bpd, while Essar buys 110,000 bpd of oil from Tehran.