By DEBIPRASAD NAYAK And BIMAN MUKHERJI
India has been unable to pay in full for Iranian oil imports because tightened U.S. sanctions have made it difficult to access U.S. dollars for transactions with Iran. Instead, Iran has agreed to accept payment in Indian rupees and sent a trade delegation to India this week to look for goods to buy with the money it earns.
President of the Tehran Chamber of Commerce, Industry and Mines, Yahya Al Eshagh, third from left, arriving with members of an Iranian delegation at a meeting in New Delhi, Tuesday.
The U.S. is threatening sanctions against financial institutions of countries that fail to significantly reduce oil imports from Iran before a June 28 deadline.
U.S. Secretary of State Hillary Clinton, on a visit to India this week, praised New Delhi for cutting back on purchases from Iran in recent months, but urged the country to make further reductions. A senior U.S. State Department official will travel to India next week to assess the country’s ability to shift more oil purchases to countries such as Iraq and Saudi Arabia.
While reducing purchases, Indian officials say the country—which relies on imports for three-quarters of its crude needs—has to buy from Iran to meet growing local demand for oil.
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The Iranian trade delegation, whose visit coincided with Mrs. Clinton’s trip to India this week, shows the delicate balance New Delhi is trying to maintain between toeing Washington’s line and continuing to buy oil from Iran.
A spokesman for the U.S. Embassy in New Delhi, Peter Vrooman, declined to comment on the Iranian trade delegation.
Yahya al Eshagh, president of the Tehran Chamber of Commerce, Industry and Mines, said, “We don’t have anything to do with the visit of Hillary Clinton. We are very happy that we are doing our own business.”
The Iranian trade delegation, which included government officials, and representatives from private and state-owned companies, will wrap up its six-day visit Friday. Rafeeque Ahmed, president of the Federation of Indian Export Organisations, said private business groups had negotiated deals on agricultural commodities for shipment starting as early as this month.
Mr. Eshagh didn’t disclose the size of the deals, but said both nations were looking to step up annual trade to $24 billion in the medium term from $14 billion now.
In February, Iran agreed to accept payment in Indian rupees for up to 45% of its oil exports to India, and the countries have set up a credit window between Indian and Iranian state-owned banks. That means Tehran has to find Indian exports to buy with the rupees it earns.
An Indian delegation of exporters traveled to Iran earlier this year to showcase products.
Transactions in the Iranian rial and in Indian rupees through the credit window already have begun, Mr. Eshagh said.
The U.S. is unlikely to be too worried by the payment mechanism—which Iran also has with countries such as Turkey, Iraq and Afghanistan—as it only gives Tehran access to Indian rupees and not a fully convertible currency such as the U.S. dollar, which it could use to further its nuclear program. The U.S. claims Tehran is using the program to develop nuclear weapons, while Iran says it is for peaceful energy development.
Washington, however, will be looking to see if India’s overall imports of Iranian oil decrease in the months ahead, after they fell to about 9% of the country’s total oil imports currently, from 12% last year. India now imports between $10 billion and $12 billion of crude oil from Iran annually.
The U.S. has exempted the European Union and Japan from potential sanctions after they significantly reduced oil imports from Iran. Washington says financial institutions from 12 other countries, including India, Turkey and China, could face sanctions unless they further reduce purchases.
With sanctions hitting the supply of goods from the U.S. and Europe, Iran is looking to buy food products and pharmaceuticals from elsewhere. It has turned to Australia, Canada, Russia and India to buy wheat, corn, soy meal and other commodities.
Iran has been negotiating to buy as much as three million tons of wheat from India, but the deal has gotten stuck over traces of fungal disease in crops from the country’s northern breadbasket region. Members of the Iranian delegation said an Indian team will be visiting Tehran soon to discuss the issue. Indian officials argue most wheat crops have small traces of the fungal disease and say they believe Tehran is trying to push down the price by focusing on this.
Still, an Indian government official said that New Delhi is considering exporting wheat from other regions, such as the western state of Gujarat and central state of Madhya Pradesh, whose wheat crop is free of the fungal disease.
