By Admin 
Iran Debt: Tension has increased in West Asia during the ongoing conflict between Iran and America. The situation has worsened even more when Donald Trump has claimed that American air strikes have destroyed the military bases on Kharg Island. According to Donald Trump’s statement, this attack has greatly weakened Iran’s military structure. Meanwhile, people’s attention has also been drawn to the economic relations between India and Iran. Let us know how much financial debt or borrowing exists between the two countries.
Does India give loan to Iran?
Unlike many international financial systems, Iran does not generally borrow money from India in the form of conventional government loans. Instead, financial relations between India and Iran have been largely based on trade and payment settlements. This has especially happened in the case of crude oil.
For many years, India was one of the largest buyers of Iranian crude oil. However, due to international sanctions imposed on Iran, it became difficult to make payments through the traditional global banking system. This system depends on the US dollar or Europe. Due to these restrictions, financial relations between the two countries changed from direct lending to a trade-based payment system.
large outstanding amount of payment
When India imported crude oil from Iran during the ban period, Indian oil companies often faced difficulties in making payments through international financial networks. This was the reason why billions of dollars of payment for Iranian oil got accumulated as arrears. This was to be given to Indian refiners to Iran. These were not loans given by India but were payments made for oil imports.
To solve this problem, both the countries started a rupee based settlement system. Under this arrangement, India deposited some part of the oil payment in Indian rupees instead of dollars. This money was kept in special accounts created in Indian banks like UCO Bank. Since the payments were made in rupees, restrictions on transactions in international currencies did not apply to them.
investment in infrastructure projects
Apart from trade-based settlements, India has also invested in specific development projects in Iran. The biggest example of this is the development of Chabahar port. India promised to give about 500 million dollars for the development of this port. As part of this promise, approximately $150 million was provided through a line of credit by the Export Import Bank of India.
Why direct cash loans difficult?
India has avoided giving large direct cash loans to Iran primarily because Western countries have imposed international sanctions on it. Apart from all this, according to the estimates of the International Monetary Fund, by the middle of 2024, Iran’s total external debt was about 4.36 billion dollars. Of this amount, approximately two billion dollars was considered short-term debt. Overall, Iran’s government debt was estimated at between 20% and 25% of its GDP.
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