The payment for Iranian crude is expected to pose a huge challenge as the US in its sanction order has barred several banks and financial institutions that limits India’s ability to route money to Tehran in any currency other than the rupee.

Sources said the officials of the two countries would meet soon to work out an agreement that would result in uninterrupted crude supplies and payment. The finer details of the sanctions are being studied to work out a solution.

The waiver by the US allows payment in rupee to be kept in an escrow account, which would help to boost the country’s export of agricultural, pharma and other humanitarian goods to Tehran.

While India would be keen to make the payment in rupee as it would help the export of Indian products to Tehran, the Islamic nation would be keen to get at least some part of the payment in euro or other currencies.

India had given permission to Iranian private lender Bank Pasargad to open a branch in Mumbai, which could have been used for payments. But the latest sanction list issued by the US bars any dealing with this bank.

During the last sanction against Iran, the country had paid 55 per cent of its imports through Turkish, German and Italian banks into an euro escrow account of the Iranians.

Turkey’s Halkbank, Europaisch-Iranische Handelsbank of Germany and Italian Central bank were used to pay the dues to Tehran. However, the sanction list released by the US treasury department includes these banks.

US treasury under-secretary Sigal Mandelker in a statement said: “This action is aimed at cutting off Iranian banks that facilitate Iran’s domestic repression and foreign adventurism from the international financial system, and will highlight for the world the true nature of the regime’s abuse of its domestic banking system.”

The fresh restrictions will hit oil exports, shipping and banks — all core parts of the Iranian economy — and will also directly affect companies from Third World countries doing business with the Islamic nation. More than 700 individuals, entities, vessels and aircraft are now on the sanction list, including major banks, oil exporters and shipping companies.

In addition, the Brussels-based Swift network for making international payments has said it is suspending certain Iranian banks’ (which are sanctioned by the US) access to the messaging system.

Officials indicated that India may again use Uco Bank for a rupee trade deal with Iran as it used during the earlier round of sanctions imposed by the US and European nations.