Jolted by Germany’s refusal to route its payments to Iran, India is exploring using Dubai or Turkey-based banks as conduit for the payment of crude oil imported by it from the Persian Gulf nation.

“We are exploring if Indian oil firms can open accounts in banks like Dubai-based Noor Islamic Bank so they can undertake a direct transfer of money for oil they buy from Iran,” a senior government official said.

Under the scheme being discussed, the state-run National Iranian Oil Co (NIOC) too will open an account in a UAE or Turkey-based bank to receive direct money transfer from oil companies.

“The mode of payment will be euro,” he said. “We have forwarded a list of banks to Iran... they have to choose the bank where both Indian firms and NIOC can open account.”

Indian firms opening account in the UAE or Turkey bank will, however, be subject to the Reserve Bank of India nod.

Last month, Germany under US pressure stopped accepting money from India for onward transfer to an Iranian-owned, Hamburg-based bank, towards crude import payments.

India, in February, had begun clearing the past dues for Iranian oil imports by making euro payments through the German-based Europisch-Iranische Handelsbank AG (EIH Bank).

But EIH, which is owned by Iran, is a banned entity in the US and Washington persuaded Germany to stop payments. About €1.5 billion had been paid through EIH when Germany refused to accept any further payments. This has resulted in outstanding of $2.8 billion as on March end towards Iran, which has continued to supply oil on credit.

The problem began after RBI in late December last year scrapped a long-standing payment mechanism used to pay for Iranian crude oil imports, which make up for 12 per cent of the nation’s oil needs.

In February, the two nations decided to route payments through EIH and the Oil Minister, Mr S. Jaipal Reddy, in early March made a statement to Parliament saying “pending dues of NIOC are now being cleared and as of March 1, 2011, payment of €1.5 billion has been made to the Central Bank of Iran.’’

But that was the last payment made to Iran as, soon after the news broke out, the US told Germany of the sanction conditionalities against the Gulf nation for its nuclear policy.

Oil supplies from Iran have, however, not been affected and the Persian Gulf nation continues to sell oil on credit backed by corporate guarantee.

“We are considering various alternatives... making payments in rupee is one of them,” the official said.

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