India Said to Deny Branch for Iran Bank Under U.S. Pressure

India barred an Iranian bank from opening a branch in the country because of U.S. pressure, making it harder for the Persian Gulf state to settle oil trades with its second-biggest crude customer, two people with knowledge of the matter said.

Parsian Bank, based in Tehran, had sought approval for a Mumbai office to facilitate trade transactions in rupees, the people said, declining to be identified because the information is confidential.

An official at Parsian Bank in Tehran who declined to be identified said the lender was yet to receive a permit. A person who answered the telephone at India’s finance ministry in New Delhi said D.S. Malik, a spokesman, was unavailable to comment.

U.S. Secretary of State Hillary Clinton will meet Indian leaders today in New Delhi, where she will urge the South Asian nation to further curtail Iranian crude imports. The U.S. and its allies are seeking international support for a campaign to pressure the Islamic Republic over its nuclear program, which they say is a cover for building atomic weapons and Iran says is for civilian purposes.

Banking Transactions

India, which relies on imports for almost 80 percent of its oil requirements, has faced difficulties finding banks willing to transfer payments to Iran since the Reserve Bank of India in December 2010 dismantled a mechanism to settle trade in euros and dollars.

Transactions are now routed through Ankara-based Turkiye Halk Bankasi AS, which has told Indian refiners it may no longer be able to act as an intermediary when European Union sanctions take effect in July, four people with knowledge of the matter said Jan. 10.

India’s government-run UCO Bank has been approved to be used by Indian refiners to deposit as much as 45 percent of crude payments in rupees, which will then be transferred to Iran, people with knowledge of the matter said March 28.

A Mumbai branch for Parsian would have made such transactions easier and may have helped skirt U.S. sanctions, the two people said today.

India may continue paying for Iranian oil in foreign currencies until European Union sanctions take effect, when buyers will start using rupees, two people with knowledge of the matter said March 28. Payments in foreign currencies are preferred because the rupee cannot be directly converted overseas.

Iran Oil Cuts

India is “certainly working toward lowering their purchase of Iranian oil,” Clinton told a town-hall style gathering of students and civic leaders in the eastern Indian city of Kolkata today. “We hope they will do even more,” she said, adding that the U.S. believes there are adequate supplies of crude in the international marketplace to enable it to do so.

Mangalore Refinery & Petrochemicals Ltd. and Essar Oil Ltd., India’s biggest buyers of Iranian crude, plan to cut purchases from the Islamic Republic by as much as 15 percent, people with knowledge of the matter said this month and in March.

Clinton’s trip to New Delhi coincides with the visit of an Iranian trade delegation to discuss settlement of transactions. As the areas under discussion are foodstuffs and other non-strategic items, the U.S. does not have a problem with the arrangement, according to the State Department official accompanying Clinton.

The U.S. administration wants China, India and 10 other nations to present plans detailing how they will curtail Iranian oil imports, saying past cuts aren’t enough to win them an exclusion from new U.S. sanctions. In March, Clinton granted Japan and European Union countries six-month, renewable exemptions from the measures that take effect June 28, crediting them with “significantly reducing” imports from the Persian Gulf nation.

It is too early to judge if India will win an exemption, Clinton said today.

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