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India to Mount Trade Team To Iran; Ignores US, EU?Sanctions |
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Notwithstanding the sanctions imposed by the US and European countries, India plans to more than double its exports to Iran with the two countries working out a payment mechanism for oil purchase from the West Asian nation. An Indian business delegation will be visiting Tehran and Tabriz in the second week of March for this purpose.
The two countries, early this month, have agreed that New Delhi will pay 45 per cent of India’s nearly $10 billion imports from Iran in Indian currency. Since India exported only $2.7 billion worth of goods, efforts are on to identify new products to double the exports so that there is no difficulty in making payment of $4.5-5 billion in rupees for oil imports.
Federation of Indian Exporters Organisation will send 35-40 member business delegation to Tehran and Tabriz March 10-14, Fieo president Rafeeq Ahmed told Financial Chronicle. Textiles machinery, auto components, castings, pharmaceuticals and bulk drugs and electrical appliances have been identified as sectors with huge export potential. Iran is in the process of modernising its textile industry.
Traditionally, it imported textile machinery from Europe. The recent economic sanctions imposed by the European countries have opened up a huge opportunity for India in this sector.
With the new payment mechanism in place, Indian exporters will start receiving payments in rupees for sales to Iran within two weeks, Ahmed said. About $3 billion payment has been stuck since December 2010 when a payment conduit was closed under pressure from the US, which has imposed sanctions in its attempt to stop Iran’s suspected nuclear programme.
India has made it clear that regardless of these sanctions, it will continue to buy oil from Iran as it contributes around 12 per cent of its oil imports and is necessary for energy security of the country.
Indian oil importers have been paying about $10 billion for crude oil import from Iran annually through Turkey’s Halkbank. As per the new payment mechanism, 45 per cent of the oil imports will be paid in rupees and the state-owned UCO Bank has been identified as nodal bank from the Indian side. One bank from Iranian side is yet to be identified. This payment mechanism will be less expensive.
Iran’s central bank has already deposited with UCO Bank about $1 billion which had been used in the Asian Clearing Union (ACU), the longstanding mechanism that ended in 2010.
This will be used to kick off rupee payments to India's exporters. This will provide a channel for Tehran to use the restricted Indian currency it would otherwise find is difficult to spend. India’s oil import bill is about four times that of its exports to Iran.
Not letting the recent bomb blast in front of the Israeli Embassy in Delhi hamper its relationship, commerce and industry minister Anand Sharma said in Islamabad recently that India's trade relations with Iran would not be affected by the bomb attack. The Indian government is determined to go ahead with the crucial visit of the trade delegation as New Delhi sees Iran as a potential investment and trade destination.
Finance minister Pran-ab Mukherjee too during a recent US visit, said it was impossible for energy-hungry India to reduce the imports from Iran drastically. Iran is an important country for India despite the US and European sanctions imposed on Iran. India’s oil import from Iran is the second largest, next only to Saudi Arabia.
Ahmed said, “The new payment mechanism will certainly open up opportunity for boosting exports. It will also resolve pending payments to our exporters from Iran.” “We have already received confirmation from 27 businessmen. Our business delegation will have 35-40 members. It will include one or two exporters, whose payments are stuck, especially engineering goods,” he said.
Ahmed said he did not see any difficulty in doubling or trebling India’s exports. Already a few billion dollars of exports to Iran are routed through Dubai, over and above the direct exports of $2.7 billion. Apart from traditional items like tea and basmati rice, he is confident that textiles machinery, castings, auto and machinery components have huge potential for exports.
Iran has been a good trading partner. With $88 billion foreign exchange reserves, Ahmed does not see any payment problems, except for the sanctions. Iran’s total imports accounted for $66 billion and imports from India accounted for less than 5 per cent.
The fear of conflict between Israel and Iran has not dampened the spirits of Indian businessmen, he said adding even during the height of Iran-Iraq conflict in the 1980s, Indian businessmen were trading with both Iran and Iraq.
Source : mydigitalfc.com
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