Crude payments: India, Iran hope to resolve row in Tehran

"We are in discussions with NIOC (National Iranian Oil Company) to resolve the issue," he said here.An Additional Secretary in the Ministry of Finance will lead a delegation of officials from the Reserve Bank of India, lenders like State Bank of India and state-run oil companies to Tehran to explore an alternative payment mechanism after the RBI clamped down on the main conduit Indian companies use to pay for Iranian oil.

Sundareshan said the meeting would focus on narrowing down on banks through which payments can be sent to NIOC for crude supplies.SBI, the nation's largest lender, last week said it is ready to facilitate payments for Iranian crude oil, but is awaiting notification of a bank not under US sanctions through which it can route the payments.
"Payments are not being routed (currently) as there is no arrangement (to receive money at Iranian end). Iranians have to line up a bank," SBI Deputy Managing Director and Group Executive for International Banking Pratip Chaudhuri had said.

SBI has refused to issue fresh Letters of Credit (LCs) to public and private sector refiners, who import some 12 million barrels of crude oil from Iran every month, after the RBI move.

"Right now, they are not able to pay for oil, not because we are afraid of the sanctions or something, but because they are not able to designate a suitable bank which would receive the payment on their behalf," he said. "Once that it done, the rest of the things can be taken care of," Chaudhuri added.

On December 23, the RBI said that all trade-related payments to Iran had to be made outside the Asian Clearing Union (ACU), a regional clearing house through which most India-Iran trade was being conducted.

Last week, India and Iran had agreed to route payments for crude through the Hamburg-based European-Iranian Trade Bank AG (EIH), an Iranian bank that is already under US sanctions.

It was said that SBI could transfer money from its Frankfurt branch to the bank, but SBI has so far refused to play ball, fearing it could face sanctions by the US."EIH is also under sanction, we cannot deal with any kind (of bank) under sanction," Chaudhuri said.
EIH has not been sanctioned by the United Nations or the European Union. But in September, the US Treasury blacklisted the bank, saying it provided a financial lifeline to Iranian companies that allegedly supported weapons proliferation.

A Finance Ministry official said SBI would take suitable precautions to avoid possible US sanctions due to any dealings with the blacklisted .