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TRADE

India channels funds to Iran via Bundesbank

India is set to pay Iran for billions of dollars worth of oil imports by channelling funds to Tehran via the German central bank, the business daily Handelsblatt reported Monday.

India channels funds to Iran via Bundesbank
Photo: DPA

Under pressure from the United States to break direct commercial links with the Islamic republic, India intends to place money for its Iranian oil imports in an account with the Bundesbank, according to Handelsblatt.

The Bundesbank would then transfer the money to the European-Iranian Trade Bank AG (EIH), based in the northern German city of Hamburg, the paper said, quoting financial and political sources.

“We are in talks with the Bundesbank,” Neeta Bhushan of the Indian Finance Ministry told the paper.

The arrangement has been given the green light by two ministries in the German government, the Handelsblatt reported.

Two of the EIH’s main shareholders, Bank Mellat and Bank Refah, are subject to European Union sanctions approved last year in addition to UN restrictions, the paper said.

Contacted by news agency AFP, the Bundesbank declined to comment while a spokeswoman for the Economy Ministry told a regular government briefing that the EIH, also known as the EIHB, was itself not subject to EU or UN sanctions.

“The inclusion of a bank on the [sanctions] list is not something decided by the [German] government but the European Union council,” spokeswoman Sarah Schneid said.

“What counts is involvement of a bank in financing Iran’s nuclear and missile programme … The government investigates closely any indications [of such involvement].”

Chancellor Angela Merkel’s spokesman Steffen Seibert stressed that the bank was under “strict” supervision, with all transfers over €10,000 ($14,000) needing to be reported and all those above €40,000 requiring approval.

Germany has long been under fire for its close business ties with Iran, with the country’s exports there totalling €3.8 billion in 2010, according to official figures.

Berlin’s abstention this month over a UN Security Council resolution – it holds a non-permanent seat in the body – authorising military action in Libya has also angered Germany’s partners and put Merkel under pressure at home.

AFP/adn

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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