LONDON — As India takes its seat on the U.N. Security Council as the new nonpermanent member after nearly a two-decade hiatus, its latest move vis-a-vis Iran has signaled New Delhi's desire to be viewed as a responsible rising power and a potential permanent member of the Security Council.
The Reserve Bank of India has declared that oil payments to Iran can no longer be settled using the Asian Clearing Union mechanism — a system run by the central banks of nine countries, including India and Iran. This was a bold move as India imports 12 million barrels of crude oil every month from Iran with Iran accounting for 12 percent of India's supplies. As the two countries try to find ways to solve this problem permanently, India will be paying for Iranian crude oil through a German bank based in Hamburg as an interim measure.
It was Iran that had asked India to use the ACU so as to avoid being targeted by U.S. sanctions. The ACU mechanism made it difficult for third countries to trace transactions and that ambiguity has troubled Washington for some time. The U.S. has complained that the transactions lacked transparency, allowing payments to be made to Iranian companies controlled by groups banned under the sanctions regime. The U.S. was quick to support India's decisions, suggesting that the RBI "has made the right decision to carefully scrutinize and reduce its financial dealings with the Central Bank of Iran."