RBI Mulling Alternative To Asian Clearing Union For Iran Payments

The Reserve Bank of India will try to ensure trade payments to Iran through channels available outside the Asian Clearing Union, the central bank's deputy governor said Saturday.

"We have to do it within whatever the available channels are. ... We are currently discussing it," Shyamala Gopinath told reporters on the sidelines of an annual fixed income conference.

The need for an alternative channel emerged after the RBI late last month said that all trade-related payments with Iran had to be cleared outside the Asian Clearing Union, a clearinghouse through which most India-Iran trade was being conducted.

India's move came amid international efforts to cut off funding for what the U.S. and others say is Tehran's pursuit of nuclear weapons.

New Delhi and Tehran have now opted for a temporary channel wherein Indian oil companies will open accounts with state-run lender State Bank of India (SBKJY, 500112.BY), which will in turn deposit the payments for Iranian crude with the European-Iranian Trade Bank, or EIH Bank.

The new mechanism also may ruffle U.S. feathers as the Treasury Department blacklisted EIH Bank in September, saying the bank provided a financial lifeline to Iranian companies that the Treasury alleges support weapons proliferation.

 
   -By Khushita Vasant, Dow Jones Newswires; [phone]; [e-mail]