NEW DELHI: India has resolved a crude oil payment problem with Iran dating back to December and is set to begin clearing billions of dollars in delayed payments, an official said on Thursday.

In December, India's central bank said payments to Iran -- India's second biggest supplier of crude -- could no longer be settled through a particular clearing house due to sanctions against Tehran.

The State Bank of India (SBI) is to make payments in euros to the National Iranian Oil Company through the Germany-based Europaisch-Iranische Handelsbank, or EIH Bank, Dow Jones Newswires quoted an unnamed ministry official as saying.

"There was a reluctance on the part of the State Bank of India to transact with EIH. They have been given comfort by the government at the highest level," the official said.

He added that Indian oil firms owed $2 billion.

The United States believes Tehran was using the same financial clearing house as India -- the Asian Clearing Union (ACU) -- to evade international sanctions.

The move to block the ACU mechanism, which was run by the central banks of India and other South Asian countries, left Indian oil firms without a way to pay for their supplies.India imports around 80 percent of its crude oil needs.

In June, the UN approved a fourth round of sanctions against Iran over its disputed nuclear programme, while the US and the European Union slapped on additional restrictions.