The central bank in India said any action with Iran should be settled outside of the Asian Clearing House system, prompting Tehran to back away from the long-standing mechanism.
Tehran had asked Indian energy companies to use the clearing house to avoid U.S. economic pressure. Washington, which passed unilateral sanctions targeting Iran's energy sector during the summer, had pressured New Delhi to abandon the ACU for energy issues.
A source in the Indian government speaking to the Economic Times of India said on condition of anonymity that Tehran suggested Indian companies open a euro account at Iran's EIH bank in Frankfurt to facilitate oil transactions.
"(A letter from Iran) says pending a full resolution of the issue at hand, which is at central banks' level, for the month of January I am offering you a dispensation, which is to open a euro account in EIH Bank in which the central bank of Iran has an account," the source said.
Washington in September slapped EIH with sanctions for working with funds associated with Iran's military activity. A foreign ministry spokesman from Iran said the issue regarding oil trade between Iran and India is "about technical issues."