India in Touch with EU over Alternative Payment Mechanism for Iran Oil Imports
Bandar Abbas Gas Condensate Refiner in Iran (Photo: shana.ir)

As the U.S. deadline to halt crude oil import from Iran looms ahead, India is reportedly in talks with the European Union for an alternative channel for making payments to Tehran for buying petroleum products.

France and Germany, two European countries which are still part of the 2015 nuclear deal with Iran are working out a payment mechanism that will not include the U.S. dollar in financial transactions with Tehran. After the Trump Administration pulled out of the nuclear deal and imposed sanctions, it has also set a November 4 deadline to halt financial transactions with Iran using their currency or to face sanctions. The Trump Administration has said, “Either you can do business with Iran or with us.”

European officials are working at cross-purposes with Trump's "maximum pressure" campaign as they try to preserve as much business as possible with Iran. The goal is to persuade Iran's leaders to stay in the nuclear deal for a few more years — perhaps long enough for Trump to be replaced and for a new U.S. president to rejoin the deal.

Among the financial pathways under discussion in Brussels and other capitals: Devising an alternative — free from U.S. influence — to the current electronic system used to transfer money from place to place, European officials told NBC News. And since commercial banks must stop handling transactions with Iran or face U.S. penalties, European countries are considering using their own central banks to transfer funds to Iran, wagering that Trump wouldn't go so far as to sanction an ally's central bank.

India is yet to take a call on complying with the U.S. sanctions on Iran. Not only is Iran India's second-biggest oil supplier, but India is also the second-top oil client of Iran -- the first being China.

India is in touch with both Iran and the U.S. regarding its oil imports from Iran and the issue was brought up in the recently held 2+2 dialogue between New Delhi and Washington. India has been working through diplomatic channels to look at the U.S. to grant exceptions from the upcoming sanctions.

Earlier, India was looking at the possibility of falling back on the rupee-rial arrangement for importing oil from Iran in the wake of U.S. sanctions. The rupee-rial arrangement was used to buy oil from Iran before sanctions were lifted against it three years ago.

Under the mechanism, India used to pay in euros to clear 55 per cent of its dues through Ankara-based Halk bank. The remaining 45 per cent payment was remitted in rupees in accounts Iranian oil companies had with the UCO Bank. (With wire inputs)