India to Pay Iran for Oil Using Germany

India is set to pay Iran for billions of dollars worth of oil imports by channeling funds to Tehran via the German central bank, a German newspaper report said Monday.

Under pressure from the United States to break direct commercial links with the Islamic republic, India intends to place money for its Iranian oil imports in an account with the Bundesbank, the Handelsblatt business daily reported.

The Bundesbank would then transfer the money to the European-Iranian Trade Bank AG (EIH), based in the northern German city of Hamburg, the paper said, quoting financial and political sources.

"We are in talks with the Bundesbank," the paper cited Neeta Bhushan from the Indian finance ministry as saying.

The arrangement has been given the green light by two ministries in the German government, Handelsblatt said.

Two of the EIH's main shareholders, Bank Mellat and Bank Refah are subject to European Union sanctions approved last year in addition to U.N. restrictions, the paper said.

Contacted by Agence France Presse, the Bundesbank declined to comment while a spokeswoman for the economy ministry told a regular government briefing that the EIH, also known as the EIHB, was not itself subject to EU or U.N. sanctions.

"The inclusion of a bank on the (sanctions) list is not something decided by the (German) government but the European Union council," spokeswoman Sarah Schneid said.

"What counts is involvement of a bank in financing Iran's nuclear and missile program ... The government investigates closely any indications (of such involvement)."

Chancellor Angela Merkel's spokesman Steffen Seibert stressed that the bank was under "strict" supervision, with all transfers over 10,000 Euros ($14,000) needing to be reported and all those above 40,000 euros requiring approval.

Germany has long been under fire for its close business ties with Iran, with the country's exports there totaling 3.8 billion euros in 2010, according to official figures.

Berlin's abstention this month over a U.N. Security Council resolution -- it holds a non-permanent seat -- authorizing military action in Libya has also angered Germany's partners and put Merkel under pressure at home.