India announced on Friday that it is working out an arrangement with Deutche Bundesbank, Germany’s Central Bank, to settle its payments to Iran for crude oil purchases. India is now importing the Iranian crude on a three-months credit program from Iran, an arrangement that ends end-March with payments due on 1 April. Beyond that date, India has to find a clearinghouse to expedite settlement of its payments to Iran.
Last December, the Reserve Bank of India (RBI), the country’s central bank, stopped using the Asia Clearing Union for settlement of the payment. India said at the time that the Asian clearinghouse would not meet Washington’s criteria for adhering to US and international sanctions against Iran. RBI instead proposed using a European bank with payments made in euro. A meeting between the two sides on 31 December in Delhi produced no results, but Iran agreed to the three-month credit arrangement until an acceptable solution would be found.
Arrangements to use the Hamburg-based European-Iranian Trade Bank (EITB) fell apart last month when India distanced itself from the bank as the US Treasury barred EITB from doing business in the US and froze its assets in US financial systems. The State Bank of India, the Indian party to the transaction, said it would not risk any possible US sanctions by dealing with EITB.
“Both countries should work out a mechanism through which we could make arrangements for timely payment due to Iran as expeditiously as possible,” said Indian Finance Minister Pranab Mukherjee on Thursday [Dow Jones, 25 February].
The Deutche Bundesbank has not yet commented on India’s attempt to use it a clearinghouse to settle payments with Iran.