The bank in Germany that is serving as the conduit for India's payments to Iran for oil imports from the latter country could face closure in a new round of sanctions against Iran.
German National Security Advisor Christoph Heusgen, on a visit to New Delhi, said that "if Iran does not accept the offers of the EU 3 + 3 and continues its nuclear programme, we favour more sanctions."
There would be a strong possibility such sanctions would put the European-Iranian Trade Bank AG (EIH), a bank owned by Iran, out of business.
EIH had been hit by the US sanctions and the German central bank had only allowed India to funnel payments to the bank after Delhi provided assurances the money would not be used to support Iran’s nuke programme.
But Western sources said Iran's continued intransigence on the nuclear front would probably mean a further tightening of sanctions. These would hit Iranian economic institutions irrespective of whether they have a role in the country's nuclear programme.
Heusgen, who is visiting India ahead of German Chancellor Angela Merkel's state visit in May, met his Indian counterpart Shiv Shankar Menon. The two discussed the issue of EIH and sanctions.
The closure of the EIH would mean India once again facing the problem of how to send payments to Iran. Most financial institutions, including Indian ones, had declined to handle such funds for fear of risking international sanctions.