Lifting of sanctions no reason to look at other trade partners, it assures
Iran will continue to increase imports from India despite a recent deal with Western powers that has eased economic sanctions against it in exchange for curbing its nuclear ambitions.
“A team of senior officials from Iran, who visited India recently, assured us that the West Asian nation is serious about continuing to engage more with India as we had stood by them in its time of trouble,” a Commerce Ministry official told Business Line.
The assurance has put to rest speculation that Iran may look at other trading partners more earnestly now that the sanctions regime was ending.
The key reason for the apprehension of a cutback in imports from India, according to industry observers, was India’s stance at the time of sanctions. India, seemingly under the US pressure, had drastically reduced crude oil imports from Iran, while nations such as China had sustained imports within the permissible limits.
The P5 plus One grouping of the major Western powers last month agreed to relax economic sanctions worth $7 billion in return for Iran’s promise to curb some of its nuclear activities. Iran will be watched (for any escalation in nuclear activity) for six months after which a permanent solution will be worked out, according to the deal.
India’s exports to Iran have more than doubled over the last two years and is likely to cross $5 billion this fiscal, aided chiefly by intensive business-to-business interactions by the two Governments. In fact, to sustain business even during sanctions, India and Iran had put in place a rupee payment mechanism for continuing oil trade. This was because foreign banks had refused to deal with Iran fearing action by the US.
Both nations had then started a joint effort to increase India’s exports to Iran so that the rupee payment for oil deposited in Iran’s account could be gainfully utilised. India imports petroleum products worth over $10 billion from Iran.
There has been buzz recently that Iran wants to do away with the rupee mechanism, while India sought for full payment of oil imports in the rupee. At present, India makes 45 per cent of its oil payments in rupees, which Tehran uses to purchase items such as rice, soyameal, tea, pharmaceuticals, and automobile parts. India pays the remaining trade balance in euros, but this too had been hit due to sanctions.
On whether India would seek full rupee payment for oil imports, Minister of State in the Ministry for Petroleum & Natural Gas Panabaaka Lakshmi had informed the Lok Sabha earlier this month that there was no such proposal.
According to Ajay Sahai, Director-General, Federation of Indian Export Organisations, every month letters of credit worth Rs 2,500 crore are being opened (by banks on both sides that are part of the rupee payment mechanism) which demonstrates that things are on the right track. “We are optimistic that exports to Iran would be to the tune of $5.5 billion this year,” Sahai said.
A delegation of Indian exporters led by FICCI is at the moment in Iran as part of the ongoing efforts to step up exports.