Attack on Israeli may hurt Indian trade with Iran: Official

An attack on an Israeli diplomat in New Delhi may "dampen" and "hurt" India's efforts to carry on trade with sanctions-hit Iran, the head of India's rice trade body said on Tuesday, and may complicate efforts to resolve a trade payment impasse.

India has struck a defiant tone over new financial sanctions imposed by the United States and European Union to punish Iran for its nuclear programme, seeking to increase trade and barter arrangements to pay for oil supplies.

But an attack on Israeli embassy staff member in New Delhi on Monday, which wounded four people, could add to uncertainties in trade between India and Iran, Vijay Setia, president of the All India Rice Exporters' Association, told Reuters.

"It will complicate matters further and hurt trade," Setia said, adding it was difficult to say how seriously trade could be affected.

"It (the tension generated by the attack) is a matter of concern and it will dampen trade sentiments between India and Iran," Setia said.

Israel accused arch-enemies Iran and its Lebanese ally Hezbollah of being behind twin bomb attacks that targeted Israeli embassy staff in India and Georgia on Monday. Tehran has denied involvement in the attacks.

India is currently Iran's biggest oil buyer as well as Tehran's top supplier of rice. It is considering stepping up exports of a range of goods, including wheat and rice, to settle part of its $11 billion annual oil bill to Iran.

The two sides are seeking alternative payment mechanisms to settle their trade after existing conduits have either been scrapped or become vulnerable in the face of Western sanctions.

The payment impasse has already meant Iranian buyers have defaulted on purchases of about 200,000 tonnes of rice from India worth some $144 million.

Setia said that default figure is rising.

"Credit is building up and at the same time some of the Iranian buyers are asking for a longer credit period," he said.

Most Indian rice exporters allow 90 days credit.

Iran relies on imports for about 45% of its annual rice consumption of 2.9 million tonnes, according to US Department of Agriculture data.