India, Iran to open fresh oil payment channels

Days after the Indian government clamped down on payments through the Asian Clearing Union, the main conduit Indian companies use to pay for Iranian oil, New Delhi and Tehran have opened a temporary channel for transactions - one that involves routing payments through an Iranian bank that is already under US sanctions. (See: Oil payments: Indo-Iran talks deadlocked)

Observers say the move essentially takes India from one uncomfortable spot into another, and could place Indian firms at loggerheads with the US legal system, reports The Wall Street Journal. Under US legislation enacted in July, any foreign firm dealing with Iranian entities sanctioned by Washington could also find itself banned from conducting business inside the US.

Faced with the UAE's banking restrictions on business with Iran and New Delhi's uncertainty over Japan's reaction to US sanctions on Iran, the National Iranian Oil Co has asked Indian refiners to pay for January crude oil imports in euros through a German bank.

''The NIOC has asked us to transfer euros in Hamburg-based Europäisch-Iranische Handelsbank AG (EIH Bank) to ensure that there are no supply disruptions in January,'' said an official of the Indian Oil Corp.

The senior official told reporters on Tuesday that Iran's state-owned National Iranian Oil Co sent a letter to Indian oil companies saying payments to Iran could be routed through a euro account at European-Iranian Trade Bank, or EIH Bank. The letter wasn't made public.

EIH isn't subject to sanctions by the United Nations or the European Union. But in September, the US treasury blacklisted the bank, barring it from conducting any business inside the US and freezing any assets it holds in the American financial system.