Germany’s Spiegel reports today that German Chancellor Angela Merkel is moving to end the Bundesbank’s involvement in India’s oil payments to Iran. As we had reported on Friday, the German central bank had agreed to act as the conduit for the transfer of oil payments from the Reserve Bank of India (RBI) to Hamburg-based Europäisch-Iranische Handelsbank or EIH bank, which is controlled by Iran. If the Bundesbank in fact ends its involvement in the deal, India’s import of Iranian oil valued at over $12 billion annually will be in jeopardy.
Last December, RBI stopped using the Asian Clearing Union to settle India’s payments to Iran for the Union's non-adherence to US and European sanctions against Iran. For the past three months, India was importing Iran’s crude oil on credit. On 3 March, RBI finally resumed its payments through the Bundesbank to Iran's account at EIH bank.
On Tuesday, the German financial newspaper Handelsblat had first reported the possibility that Chancellor Angela Merkel would stop the Bundesbank’s involvement in the deals. Sources cited by Handelsblatt have now told Speigel that the Bundesbank would process payments for oil deliveries that have already taken place, but would not permit further deals in the future.
The end of Budesbank’s involvement would be a serious setback for the Iranian government and the Iranian oil industry, and a major victory for US attempt in strengthening financial sanctions against Iran.