Germany can't stop India from buying Iranian oil

Despite pressure from the US, Germany can't figure a way to stop India from using a Hamburg bank to process its payment for Iranian oil -- a purchase that critics say could help fund Iran's nuclear program.

The New York Times reports that German officials said they had no legal grounds for blocking the payments, made by India to the Hamburg-based Europäisch-Iranische Handelsbank, or E.I.H. The money flows through the German central bank, the Bundesbank, as part of the international payments system. 

The U.S. has pushed Germany to stop the flow of money, but Germany says it can't do that without proof that E.I.H. has violated U.N. sanctions against supplying the Iranian weapons program, the paper said. Meanwhile, India is unconvinced of, or unconcerned about, any connection between its oil purchases and Iran's nuclear program.

As far as India is concerned, the trouble is that the rupee doesn't fly as a currency for international transactions, though local papers reported recently that the government is studying exactly that as a potential solution if Germany does stop the transactions. 

According to the Calcutta Telegraph, India's finance ministry wants to make the payment in rupees, but the central bank has vetoed the move because it would exacerbate the trade imbalance with Iran. Currently, Iran buys goods worth $1 billion from India against exports of $12 billion of crude, and the bank believes that making those payments in rupees will leave Iran with huge reserves of the Indian currency.