The finance ministry is looking at routing its payment for Iranian oil through a European bank which is ?more neutral? than the European Iranian Trade bank (EIH). India started using the new payment route through EIH and the European financial system after the Reserve Bank of India in December forbade the government from using the Asian Clearing Union to handle the transactions with Iran. So far, India has paid 1.5 billion euros through EIH to the Iranian central bank.
A finance ministry official on condition of anonymity said, ?EIH can?t be a long-term solution. We are looking at banks in Europe where Iranian central bank has an account. We will also open an account with (that) bank. We will have to look for a neutral bank, which EIH is not.?
The move comes at a time when India has issued a notice on March 31, banning all trade in goods and technology with Iran which could help that country?s controversial nuclear programme.
The change made in India?s foreign trade policy is to align it to the United Nation policy which has put sanctions on Iran.
The arrangement with EIH, a German bank, is anyway deemed temporary as the bank could face closure in a new round of UN sanctions on Iran. German national security advisor Christoph Heusgen, was recently quoted on the visit to New Delhi, ?if Iran does not accept the European Union?s offer and continues its nuclear programme, we favour more sanctions.? The EU offer was that if Iran agrees to curtail their investment in nuclear power, it would coax the UN to roll back the sanctions.
According to a recent New York Times report, the EIH in its annual report for 2009 stated that the Bank Mellat and Bank of Industry and Mine, based in Teheran, each owned more than 25% in it. The US treasury has included both banks on a list of institutions that are controlled by the government of Iran.
The report further stated, the European Union, last year, froze the assets of dozens of companies and people, including several banks, deemed to be involved in supporting the Iranian nuclear weapons program or helping the country evade sanctions. EIH was not on the list but it provided financial services to several institutions which are on the EU list.
The United States authorities have been pressing Germany to shut down the EIH bank. But the German authorities so far, have not taken any action due to lack of strong evidence that it has violated UN sanctions against supplying the Iranian weapons program.
India depends on Iran for about 15% of its crude oil imports. Iran is India?s second-biggest oil supplier after Saudi Arabia. India had imported 400,000 barrels per day (bpd) of oil from Iran in 2009-10 and about 178,000 bpd during April-September. India, Asia?s third-largest oil consumer, imports over two-thirds of its oil needs and depends heavily on volumes from the West Asia to power its economy.
India and Iran have been negotiating for months on ways to resolve the payment deadlock on a long-term basis and salvage the trade, which is worth around $12 billion annually.