Another blow to the Islamic Republic’s oil business

India’s central bank has said it will not facilitate payments for Iranian crude imports, in another blow to the Islamic Republic’s oil business as global pressure on Tehran grows over its nuclear programme.

Although United Nations sanctions do not forbid buying Iranian oil, the United States has pressed hard for governments and companies to stop dealing with Tehran. Many oil majors and banks have abandoned their dealings since then.

U.S. President Barack Obama visited India last month and said he supported its bid for a permanent UN Security Council seat.

The Reserve Bank of India said in a statement on Thursday Indian oil imports payments to Iran will have to be settled outside the existing Asian Clearing Union (ACU) mechanism, which involves the central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka.

Iran is a major oil producer and the only exporter among the ACU block, while India is the biggest importer among them. Trade with Iran faces credit hurdles due to sanctions.

India imported about 426,000 barrels per day from Iran in 2009/10, but this may decline as major refiner Reliance Industries has not renewed its term deal.

The sanctions make it difficult to open letters of credit, which are often required for the buyer and seller of a cargo to guarantee payment upon delivery or at an agreed future date.

A second industry source said the move could make imports extremely difficult.

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