The decision was a result of consultations between Berlin and New Delhi, and not pressure from Chancellor Angela Merkel at home or abroad to disrupt the payment scheme, the high-ranking government official said.

“India has told us that this route is being phased out,” he said, confirming newspaper reports indicating that billions of euros of payments to a Hamburg-based bank handling international trade with Iran had been halted.

Earlier, Handelsblatt business daily reported that Merkel had intervened by instructing Germany’s central bank, the Bundesbank, to stop clearing payments from India headed to the bank, known as EIH, which is under US but not EU sanctions.

EIH came under renewed scrutiny last week when it emerged that Berlin had allowed India to pay for oil purchases from Iran via the bank, after India restricted its own direct payments to Iran to placate Washington’s hard-line stance.

The US had pressed Germany over the matter, although Berlin officials had said their hands were tied because the bank had not broken any EU rules, which allow payments for Iranian oil and natural gas.

The move will not come without a cost for German companies, which according to Handelsblatt now face hundreds of millions of dollars in bills outstanding for products ordered from Iran, some of which the oil money would have likely covered.

India too may now face renewed difficulties in finding a way to get payments for some nine billion euros ($12.77 billion) in annual oil purchases to Iran.

The end of the trade will further increase pressure on Tehran, already under a series of UN sanctions for refusing to freeze its uranium enrichment program, which Western powers suspect is aimed at producing a nuclear weapon.

Iran denies the allegations that it is enriching uranium to produce atomic arms, and maintains that its program is for peaceful energy needs.