Iran-China 'barter deal' may bypass sanctions; India out of picture

Iran and China are discussing a barter system to exchange Iranian oil for Chinese goods and services, as US sanctions have blocked China from paying at least $20 billion for oil, according to a Financial Times report.

The paper, citing people familiar with the issue, said US financial sanctions against Iran, which make it hard to conduct dollar-denominated business, mean China might owe the oil-rich country as much as $30 billion.

The unpaid oil bills had built up in the past two years and the governments of the two countries, which are in early-stage talks, are looking at how to "offset" the debt, the report said.

The paper said some Iranian officials were growing increasingly angry about the inability of the country's biggest oil customers such as China and India to pay cash, which has contributed to a shortage of hard currency for the country.

"Both China and India are happy to keep Iran's money in their banks and try to get Iran involved in barter deals to sell their junk, or given yuan and rupees instead of hard currencies," the FT quoted an unnamed former Iranian official as saying. The official added that Iran had not yet accepted the alternatives.

China and India together buy about one-third of Iran's oil, the country's economic lifeblood. China's oil imports from Iran have risen 49 per cent this year, according to Reuters.