India to Pay Iran $500m as Second Part of Oil Deal

Indian refiners will pay $500 million to Iran next week, the second installment in an interim deal that allows Tehran to recover part of overseas frozen oil revenues that are payments for oil it has sold, two industry sources said in Friday.

Iran and the United States, China, France, Germany, Britain and Russia agreed in July to extend a six-month interim accord until Nov. 24 after they failed to meet a July 20 deadline for reaching a long-term deal to end their nuclear dispute.

"The process for the first installment of $400 million has been initiated and the second installment of $500 million will also be cleared next week," said one of the sources.

Payment of $900 million by India was to be made in September, the sources said. It was not immediately clear why the process has been delayed.

Indian refiners together owe about $6 billion to Iran. They are depositing payments in rupees in an Indian bank. Iran uses these funds to pay for imports from India.

The sources declined to be named due to the sensitivity of the matter. The payments will be made using an existing mechanism based on a series of back-to-back transactions in different currencies that are initially channeled through the Reserve Bank of India (BANKINDIA.NS) (RBI).

On receipt of the funds from refiners, the RBI would buy dollars from authorised dealers. It would instruct the Federal Reserve to transfer dollars to the United Arab Emirates' central bank account there, after confirmation that Iran had received a final payment in dirhams from Abu Dhabi.

Iran's top oil client after China, India has imported 38 percent more oil from Tehran in the first nine months of this year than in the same period last year, tanker data obtained by Reuters show.

Tehran has already received $1 billion from Japan under the interim deal, state news agency IRNA reported last month.

Iran and the United States said they made some progress in high-level nuclear talks on Thursday but much work remained to clinch a breakthrough deal by a late-November deadline.

The six powers want Iran to scale back its uranium enrichment programme to ensure it cannot produce nuclear bombs. Iran says the programme is for peaceful purposes.

In return for continuing action to curb its nuclear programme, Iran during the four-month extension has been granted access to $2.8 billion of its funds held in foreign banks, in addition to $4.2 billion paid between January and July.

(By Nidhi Verma, Editing by William Hardy)