New Delhi
22 March 2011
The Fukushima disaster in Japan may have impelled Germany to rethink on
nuclear energy, but it remains favourably disposed to supporting India's quest for
membership of multilateral export control regimes such as the Nuclear Suppliers Group
(NSG).
However, Germany's indication that it may not stand in the way of further sanctions on
entities such as Europaisch-Iranische Handelsbank (or EIH), the Hamburg-based bank
through which India is routing funds as payment towards Iranian oil imports, would have
India worried.
The government of German chancellor Angela Merkel, who is expected to visit India in
May 2011, is understood to have conveyed that India would have to look for a more
lasting solution of making oil payments to Iran if the West shifts the focus from the Arab
unrest back to Iran.
Germany, which is Iran's number one trade partner in the EU, has so far held out on
demands by the US and Israel to shut down the EIH. But, if Iran persists on its nuclear
course ignoring the E3+3 (the UK, France, Germany and the US, China, and Russia) offer,
then Berlin will be in favour of further sanctions.
The EIH, which was founded in 1971, is owned by four large banks, all owned in turn by
the Iranian government. The US Treasury Department has blacklisted the EIH for
allegedly supporting Iran's nuclear programme, but it is not targeted by the United
Nations (UN) or European Union (EU) sanctions.
The uncertainty over oil payments not only has implications for India's energy security
as Iran is India's second largest source of crude oil, after Saudi Arabia. Trade,
particularly exports to Iran, are affected, too. The issue was understood to have been
discussed by national security adviser Shivshankar Menon in his visit to Iran earlier this
month.
After US president Barack Obama's visit to India in 2010, the Reserve Bank of India
stopped the practice of making oil payments through the Asian Clearing Union, a regional
banking arrangement. India turned to the EIH to tide over the crisis, but no satisfactory
solution has been found. Among the more imaginative options India could exercise, if the
EIH is closed, is to make the payments in Iranian Rial or another currency.
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