As if high price of crude oil is not enough, India now faces another fuel crisis.
According to a report published in Aljazeera, Iran on Thursday said it will not sell oil to India, unless payments for such sales are guaranteed by the Reserve Bank of India.
RBI on its part said that all such transactions with Iran must be settled outside the Asian Clearing Union (ACU).
The ACU includes the central banks of India, Bangladesh, Maldives, Myanmar, Iran, Pakistan, Bhutan, Nepal and Sri Lanka. The system is used by RBI and other member nations' central banks to settle bilateral trades.
India had requested Iran to immediately appoint an European bank through which payments can be made, but Iran's state-owned oil company -- National Iranian Oil Co -- has turned down India's request.
While sources in Iran confirmed the dispute, officials of the central banks of both countries are set to meet on Friday.
India is the biggest buyer of Iranian crude in the group, consuming around 400,000 barrels per day between two state-owned refiners and privately-owned Essar Oil. Total trade is around $12 billion a year.