Days after the Reserve Bank of India (RBI) clamped down on the main conduit Indian companies use for paying Iranian oil, State Bank of India (SBI) has refused to facilitate payments through an alternate temporary channel, a move that can halt import of oil from Iran.
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, an official with the nation’s largest lender said.
“There are uncertainties involved. We need to be sure about the payment mechanism,” the official said, after a meeting called by the finance ministry to discuss the row. Industry sources said SBI wants oil firms to make advance payments for the crude imports, a proposal not acceptable to public sector refiners, who fear Iranians cannot be held accountable in case of default in delivery once money is transfered in advance.
Alternatives such as SBI facilitating payments on corporate guarantee would be discussed in a second round of meeting, at the finance ministry, they said. RBI on December 23 said all trade-related payments with Iran had to be made outside the Asian Clearing Union. ACU is a clearing house arrangement among nine central banks, including that of Iran and South Asian nations. This led to pressure from the US, which says the system is opaque and Teheran could be using it to finance its alleged nuclear-weapons programme.
A finance ministry official said SBI would take suitable precautions to avoid possible US sanctions due to any dealings with the blacklisted Hamburg-based European-Iranian Trade Bank AG (EIH), the latter being an Iranian bank that is already under US sanctions. “We can look at making the temporary arrangement more permanent if it works out,” he said.
‘Resolution by Feb’
India hopes to resolve an oil payments dispute with Iran before February, the foreign secretary said today, as the South Asian giant strives to satisfy energy needs without upsetting the United States. Indian finance ministry officials were discussing possible solutions with bankers and oil executives ahead of a ministerial visit to Teheran. “We want a solution as soon as possible, the soonest possible,” Foreign Secretary Nirupamam Rao said. “It is receiving attention at the highest level of the government,” she said.