Mukesh Jagota, Subhadip Sircar – Wall Street Journal January 6, 2011
State Bank of India will take suitable precautions to avoid possible U.S. sanctions due to any dealings with the blacklisted Hamburg-based European-Iranian Trade Bank AG, a senior Indian finance ministry official said Wednesday.
The official didn’t say what precautions SBI would take to avoid any potential U.S. action. “We can look at making the temporary arrangement more permanent if it works out. An Indian delegation will be visiting Tehran soon to discuss the issue,” he said.
The official was responding to concerns about a temporary channel just opened by New Delhi and Tehran for oil-related transactions for January crude. Under the arrangement, described Tuesday by another senior Indian official, Indian oil companies will open accounts with state-run SBI, which will in turn deposit the payments for Iranian crude with European-Iranian Trade Bank, or EIH Bank.
The temporary channel was created after the Reserve Bank of India said late last month that all trade-related payments with Iran had to be made 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.
The new mechanism may ruffle U.S. feathers, too, as the Treasury Department blacklisted EIH Bank in September, saying it provided a financial lifeline to Iranian companies that it alleges support weapons proliferation.
EIH isn’t subject to sanctions by the United Nations or the European Union. But the U.S. Treasury has barred it from conducting any business inside the U.S. and freezing any assets it holds in the American financial system.
Indian firms dealing with the bank could face the same penalties under new U.S. legislation passed into law by President Barack Obama in July. SBI has branches in Los Angeles, Chicago, New York and other U.S. locales.
SBI didn’t respond to a request for comment.
Separately, Oil Minister Murli Deora told reporters India expects to resolve the issue in a couple of days.
Mr. Deora said that there was a meeting at the Reserve Bank of India’s office in Mumbai on Tuesday evening to sort out the issue. He didn’t elaborate.