Iran and India have agreed on a mechanism to resolve outstanding payments for imported crude oil amounting to more than $5bn.

Ahmad Qalebani, managing director of state-owned National Iranian Oil Company (NIOC), says the six-month issue has now been resolved, state-news agency, Shana reports.

Part of the arrears payments would be settled this week, says Qalebani.

Although there is no ban on buying Iranian crude, India has been unable to pay for its imports for more than six months. The two countries have been negotiating a new payment mechanism, following the closure of numerous banking channels by enhanced US and UN sanctions.

Bank account details have been announced to the Indian customers, and the amount deposited would be revealed on 1 August, says Mohsen Qamsari, director for international affairs at NIOC.

The announcement comes shortly after Saudi Arabia said it had agreed to sell 3 million barrels of extra oil to India in August to partially fill the gap left by Iran. Iranian oil contributes about 12 per cent of India’s total demand of 3.46 million barrels a day (b/d).

Iran issued fresh warnings to India, threatening to halt crude oil supplies if the issue of outstanding payments was not resolved. Importing about 400,000 b/d of Iranian crude, India is Iran’s second-largest buyer after China (MEED 21:7:11).