External Affairs Ministry working on strategy to deal with Iran sanctions

The Ministry of External Affairs is reaching out to other Ministries and Departments such as Finance, Commerce, Ports and Petroleum to work on a strategy to deal with the impact of the fresh economic sanctions imposed by the US on Iran.

“We don’t know yet if we can put the same arrangements in place that we resorted to during the previous sanctions. The MEA has to discuss the situation with other Ministries before taking a decision,” a government official told BusinessLine .

US President Donald Trump, last week, decided to opt out of the nuclear accord that Iran had reached with the US, UK, France, China, Russia and Germany in 2015. According to the deal, Iran agreed to limit its sensitive nuclear activities and allow international inspectors in return for the lifting of economic sanctions that the Western economies had imposed on it.

Apart from opting out of the deal, the US has also imposed much harsher sanctions on Iran, the possible impact of which is still being evaluated by most countries, including India.

“We have yet to study the finer details of the sanctions and how it would affect various facets of our relationship with Iran such as our oil imports, our exports and also on-going projects such as the Chabahar port that we are engaged in. We are in touch with other Ministries and Departments so that we can take an informed decision,” the official said.

‘Rupee-real payment’

One of the systems put in place to deal with Iran when the earlier sanctions were in place was a ‘rupee-real’ payment mechanism. It was a barter-like scheme to make part of the oil payments to Tehran in rupees through UCO Bank. The rupee received by Iran in its account in the UCO Bank was used by it to make payments for imports of various products from India.

Commerce Secretary Rita Teaotia recently confirmed that the ‘rupee-real’ payment mechanism was still in place. However, Iran’s balance in the account has dwindled since the previous sanctions were lifted in 2015 and payment in Western currencies was allowed.

“There are a lot of restrictions on banks and payments as part of the present sanctions. One has to study it carefully to see if the ‘rupee-real’ system can still work,” the official said. It is important that India establishes a system that would allow it to import oil from Iran without much hindrance, as it is the third largest supplier to India after Iraq and Saudi Arabia.

In such a scenario, the silver lining is the EU’s opposition to the US move as the former does not want the nuclear deal to be disturbed. “We are still hopeful that something will be worked out between the Western powers and the effect of the sanctions may not be severe,” the official said.

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