Washington has made it clear that it cannot overlook the fact that the European bank through which New Delhi proposes to channel its payments for its crude oil imports from Iran is under US sanctions, Indian Express reported.
Two weeks ago, it was decided at a high-level meeting that the Reserve Bank of India (RBI) would make payments to the Deutsche Bundesbank (German Central Bank) which, in turn, would pay the Europaish-Iranische Handelk AG (EIH) bank and it would then settle it with the Iranian Central Bank. The EIH bank holds most of Iran's key accounts.
This route was mapped because the US had increased pressure to stop payments through the Asian Clearing Union, the route the RBI has traditionally taken to settle accounts to Iran.
The RBI asked the government to secure an assurance from the US that it had no objections to the EIH route of payment. Washington has conveyed that EIH cannot be involved.
The issue here is that while EIH is under US sanctions, it is not included in the sanctions imposed by the United Nations and the European Union. India has tried to tell the US that it must understand New Delhi's compulsions given that 14 per cent of its crude oil imports are from Iran and an estimated $1 billion is pending in payments.
The US has told India that the Iran Central Bank (ICB) is not barred from settling petroleum accounts under the US sanctions regime so New Delhi has the option of letting ICB open an account in a bank in India and then make the payment in Euros.
Washingtonhas further clarified that payments can be channeled to ICB through any European central bank but without EIH being brought in. Alternatively, India could consider a Rupee-Rial arrangement like what Japan and South Korea have done. But with virtually no exports to Iran, officials argue, such an arrangement could be economically disadvantageous to India.
While India continues to impress upon the US to find a solution given the bilateral strategic partnership between both countries, Washington has its own reasons. The EIH Bank, owned by Iranians, has apparently been involved in transacting large amounts of money for Iran-based banks that the US blacklisted. US authorities have claimed that EIH played an important role in channelising funds meant for the Iranian nuclear programme.