India’s top bank to stop handling Iran oil payments, imports may be affected

India’s imports of Iranian oil may be hit from the end of August after the State Bank of India informed refiners it would not handle payments for the crude from November, the finance chief of Indian Oil Corp (IOC) said on Friday.

The move by the state-controlled bank, India’s biggest, comes after US President Donald Trump pulled out of an international nuclear deal with Iran last month, pledging to reimpose tough sanctions within 180 days.

“(Oil) loading will be affected from end-August under the current mechanism unless a new payment route is established,” IOC’s AK Sharma told Reuters in a telephone interview on Friday.

Some sanctions take effect after a 90-day “wind-down” period ending on August 6, and the rest, notably affecting the petroleum sector, after a 180-day period ending on November 4.

Although New Delhi had cut imports from Tehran in 2017/18 due to a dispute over a giant gas field, Iran remained its third-biggest oil supplier. Iran supplied about 458,000 barrels per day (bpd), or about a 10th of India’s more than 4.5 million bpd of imports, in the fiscal year to March 2018.

SBI has written to the Indian refiners and the government that it would not be able to handle oil payments to Iran from November 4, an official at SBI said.

“We have said that we cannot handle oil payments to Iran in any currency as that will have an immediate impact on our US operations,” this source said.

An SBI spokesman did not immediately respond to requests for comment. India’s refiners currently use SBI and Germany-based Europaeisch- Iranische Handelsbank AG to buy Iranian oil in euros, according to IOC and other companies.

India, Iran’s top oil client after China, was one of the few nations that continued to trade with Tehran during a previous round of Western sanctions.

India has said it does not follow US sanctions but companies and banks with links to the US financial system could face penalties if they do not comply. Iran offers Indian refiners a 60-day credit period on oil sales, which means payment for cargoes loaded from the end of August will be due in November.