April 5, 2011 / 9:45 AM / 8 years ago

UPDATE 1-Iran-India oil trade halted in Germany-official

* German govt official says India agrees to halt oil payments

* German companies fear unpaid bills from Iran -newspaper

(Recasts with government official)

By Gernot Heller and Brian Rohan

BERLIN, April 5 (Reuters) - India has agreed to stop paying for its Iranian oil imports via Germany, a German official said on Tuesday, ending a trade conduit that had drawn strong disapproval from the United States and Israel.

The decision was a result of consultations between Berlin and New Delhi, and not pressure from Chancellor Angela Merkel at home or abroad to disrupt the payment scheme, the high-ranking government official said, declining to be named.

“India has told us that this route is being phased out,” he said, confirming newspaper reports indicating that billions of euros of payments to a Hamburg-based bank handling international trade with Iran had been halted.

Earlier, Handelsblatt business daily reported that Merkel had intervened by instructing Germany’s central bank, the Bundesbank, to stop clearing payments from India headed to the bank, known as EIH, which is under U.S. but not EU sanctions.

Israel, whose Prime Minister Benjamin Netanyahu meets Merkel this week, wants Germany to shut down EIH, saying it supports the spread of weapons of mass destruction by handling payments to participants in Iran’s contentious nuclear programme.

EIH came under renewed scrutiny last week when it emerged that Berlin had allowed India to pay for oil purchases from Iran via the bank, after India restricted its own direct payments to Iran to placate Washington’s hard-line stance.


The United States had pressed Germany over the matter, although Berlin officials had said their hands were tied because the bank had not broken any EU rules, which allow payments for Iranian oil and natural gas.

The move will not come without a cost for German companies, which according to Handelsblatt now face hundreds of millions of dollars in bills outstanding for products ordered from Iran, some of which the oil money would have likely covered.

India too may now face renewed difficulties in finding a way to get payments for some 9 billion euros ($12.77 billion) in annual oil purchases to Iran.

The end of the trade will further increase pressure on Tehran, already under a series of U.N. sanctions for refusing to freeze its uranium enrichment programme, which Western powers suspect is aimed at producing a nuclear weapon.

Iran denies the allegations, trumpeted loudest by the United States and Israel, that it is enriching uranium to produce atomic arms, and maintains that its programme is for peaceful energy needs. (By Brian Rohan, Gernot Heller; Editing by Elizabeth Fullerton)

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