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India Joins U.S. Effort to Stifle Iran Trade

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India Joins U.S. Effort to Stifle Iran Trade

India has tightened the web of sanctions around Iran by barring Indian companies from a range of deals transacted through a key trade-finance clearinghouse.

India is Iran's biggest trading partner in business done through the Asian Clearing Union, originally set up by the United Nations in 1974 to help facilitate trade in South Asia and headquartered in Tehran.

The same mechanism that has allowed the body to fill its original purpose of greasing the wheels of international trade—by letting central banks handle payments on behalf of their nations' companies—can also obscure which firms are doing business on both ends of a deal. That, the U.S. alleges, can mean firms are dealing through their central banks with blacklisted companies, such as firms owned by Iran's elite Revolutionary Guard.

The Reserve Bank of India instructed the country's lenders Monday to stop processing current-account transactions with Iran using the ACU. Last Friday, the central bank said Indian firms can't use the ACU mechanism when making payments for the import of oil or gas. While the earlier order didn't explicitly mention Iran, the Islamic republic is the only major crude exporter in the ACU.

Iran has ramped up its use of the clearinghouse by more than 50% this year compared to last year, after it advertised the clearinghouse to Iranian and Indian firms in early 2009 as a way to avoid having to use dollars for their transactions and thus "sidestep the U.S. banking system altogether."

The U.S. Treasury has regularly raised the issue with India for more than a year, according to officials briefed on the exchanges. Those conversations accelerated after President Barack Obama's visit to India in early November, when he endorsed India's bid to become a veto-wielding member of the U.N. Security Council and join the Nuclear Suppliers Group, the informal body that controls the trade in nuclear technologies.

The U.S. has been pushing allies to tighten the squeeze on Iran, whose nuclear program has aroused international fears. The U.N., the U.S. and the European Union began enacting new sanctions on Tehran in June. U.S. and European officials have said in recent weeks that they believe sanctions are exacting a growing toll on Iran. The Iranian currency dropped nearly 10% in October, as Iranian traders scrambled to obtain dollars. Iran's largest shipping company defaulted on over $500 million in debt in recent months as international insurers have refused to underwrite their cargoes.

Still, the long-term impact of the latest step by India and other recent sanctions remains unclear.

Iran has offered no indication that it's willing to slow its nuclear program as a result of the sanctions. Some Middle East officials believe Tehran will find ways around the restrictions. Iran's abundant supplies of oil are a lure for traders around the region.

Major Indian energy companies, including Oil & Natural Gas Corp., have been exploring how to jointly develop energy resources with Iranian partners. India's Reliance Industries Ltd. was a major supplier of gasoline to Iran, which lacks sufficient refining capabilities, before the international sanctions caused the company to pull back last year.

U.S. officials have told New Delhi that Indian firms conducting transactions through the ACU run the risk of violating a law signed by Mr. Obama in July that bans international firms from doing business with 17 Iranian banks and much of Tehran's oil and gas sector, as well as the Revolutionary Guard. If Indian companies are found in violation, they could be banned from doing business in the U.S.

"This is a significant action" by India, said Stuart Levey, the Treasury Department's point man on Iran sanctions, in a statement to The Wall Street Journal Tuesday. He said the move will make clear to Indian companies that working through the ACU doesn't necessarily mean an Iranian counterpart has an international seal of approval. Attempts to contact ACU executives in Tehran were unsuccessful. Iran declined to comment through its mission at the U.N.

Statistics provided by the Clearing Union's website show that Iran's trade through the clearinghouse rose to $12.2 billion in the first 11 months of this year, from $7.8 billion in the same period in 2009. Of the more than $900 million owed Tehran through the monetary body during November, nearly $800 million comes from India, according to the ACU's website.

In January 2009, Iran's government advised local and Indian companies to use the ACU as a way of avoiding international sanctions and the U.S. banking system.

"Iranian exporters to India and Indian exporters to Iran no longer need to fret over the U.S. embargo on dollar transactions," read a January 2009 English-language report on Iran's state-owned Fars News Agency. "By resorting to the Asian Clearing Union mechanism for import-export transactions, exporters from the two countries can not only realize their receivables but also sidestep the U.S. banking system altogether."

The ACU is made up of Iran and eight South Asian nations including India. The transactions it handles are settled by the central banks of those nations. The ACU is run by a secretariat comprising officials from the nine member countries; the U.N. plays no formal role.

U.S. authorities can often track where money is going in Iran, in particular by monitoring the systems used by international banks. But if the central banks of India and Iran are standing in the middle of deals, it may be impossible to trace the money from start to finish, and that could enable blacklisted Iranian entities to do international trade, officials say.

In addition, the Asian Clearing Union transactions are often settled in the nations' local currencies, possibly providing Iranian firms a way around the U.S. Treasury Department's ban on certain Iranian entities conducting trade in U.S. dollars.

In making its announcement Monday, the Reserve Bank of India cited "the difficulties being experienced by importers/exporters" in transferring funds to and from Iran. It didn't say whether the decision was connected to concerns raised by the U.S. and other Western countries.

New Delhi is walking a difficult line in increasing pressure on Iran. India imports $11 billion of crude oil annually from Iran—about 14% of its total crude import bill, according to government statistics. Iran is India's largest crude oil supplier after Saudi Arabia.

India and Iran have worked together in the past two decades to check the Taliban in Afghanistan and Pakistan. The two have also announced ambitious port and energy projects aimed at opening up Central Asian markets and bringing additional oil and gas to the subcontinent.

India Joins U.S. Effort to Stifle Iran Trade - WSJ.com
 
Sounds like India is just trying to stay safe. Sorry that's all I have to contribute to this topic. I don't know much about Iran.
 
Looks like India is comfortably moving into US sphere..off course the US must have offered enough sweetening to India for taking such measures.

i was doubtful since few days as Iran mullahs have been issuing Pro-pakistan and Pro-Kashmir statements. Time to stop entertaining these bozos!
 
Oil crisis, by invitation
- Scarcity risk after RBI stops payment to Iran for imports


Dec. 29: India runs the risk of a crude oil shortage next month that could spill over to its 36,000 petrol pumps after the Reserve Bank of India stopped payments in US dollars and the euro through the traditional mechanism to pay for imports from Iran.

The central bank took the sudden decision last week under American pressure without consulting local crude oil importers or putting in place an alternative method for making payments.

Iran accounts for 12 per cent of India’s crude oil imports of roughly 160 million tonnes a year.

In Delhi, a petroleum ministry official tried to play down the possibility of a crisis by saying the country had crude reserves to support 74 days of consumption. However, he admitted that it could snowball into a full-blown crisis if no solution was found to the payment problem.

The official said the oil ministry had not been consulted before the RBI ordered the halt to payments through the Asian Clearing Union (ACU), an arrangement allowing participants in an intra-regional transaction to settle payments.

The decision will immediately affect 10 million barrels of crude oil from Iran that have been contracted for delivery in January.

RBI officials are due to meet their counterparts from Iran in Mumbai in the next few days to hammer out an alternative mechanism.

“If they fail to come up with alternative mechanism quickly, there would be a surge in world crude oil prices which have already topped $ 94 a barrel,” said a petroleum ministry official.

An RBI spokesperson said no date had been fixed for the meeting and declined to speculate about the options that two sides could discuss.

The RBI decision was taken after the European Central Bank asked it to certify that none of the payments routed through the ACU, established by nine nations, including India, Pakistan and Iran, was meant for items on a list of American sanctions.

Payments through the ACU were carried out in dollars till 2008. After the US imposed sanctions against Iran, the payments were made in the euro.

The US has been pushing its allies to tighten the squeeze on Iran because it fears Tehran has been running a rogue nuclear programme.

Washington had warned Indian firms dealing with Tehran that they ran the risk of violating a law signed by President Barack Obama in July that bans business with 17 Iranian banks and much of Tehran’s oil and gas sector.

Reliance Industries immediately stopped sourcing crude oil from Iran and exporting diesel to Iran, which doesn’t have much refining capability.

The Iranians are expected to ask for some form of government guarantee for payments or try and persuade the RBI to act as a facilitator for trade between the two countries. Other options include forming a consortium of local and foreign banks that could facilitate payments for crude oil imports from Tehran.

Local crude oil importers want Iran to appoint an overseas bank through which the payments could be routed.

An oil company official said the National Iranian Oil Co and Indian firms would have to find a common platform — probably a European bank — to settle trade instead of going through their central banks.

India and Iran carry out most transactions through the ACU. Data from the ACU website show that India owed $8.9 billion to Iran, or 88 per cent of the $10.1 billion that all members owed Tehran in the 11 months of 2010.

India imports close to 80 per cent of its crude oil requirements with Iran being its second largest supplier after Saudi Arabia. In 2009-2010, it imported 21.3 million tonnes of crude oil from Iran.

The Telegraph - Calcutta (Kolkata) | Frontpage | Oil crisis, by invitation
 
I remember a while ago I had said that GOI will back out of all the deals with Iran at a moments notice because of uncle sam. And at that point I was told by our indian friends here that no our country has an independent policy, and dont follow any ones instructions. Well I was right after all!
 
This is a repost

It's business as usual, just a different (more transparent) route :coffee:


India restores oil payment to Iran

Posted: Fri Dec 31 2010, 01:42 hrs New Delhi:
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Having restored payments to Iran for oil imports two days ago, India is now urgently looking for alternative options to process payment to Iran for long-term basis. The Reserve Bank of India (RBI), which had stopped Indian companies from using the Asian Clearing Union (ACU) to process current account transactions for oil and gas imports following American pressure, was asked to “restore” status quo in a high-level meeting early this week. Contrary to reports, sources said India hasn't closed down the ACU route.

Following the decision, the RBI executed what is called the “status quo ante”— a term used for restoring status quo. It meant payments will be made to Iranian firms for the oil which India buys, and they will not be stopped.

This decision was taken keeping in view of India's regular oil imports from Iran, which is one of the biggest sources for petroleum products. Now the government is actively exploring alternative methods to process payments. The most favoured route could be the commercial bank channels, sources said.

To discuss the issue, an Iranian delegation is coming here on Friday. Following this meeting, a team of Indian bankers and insurance experts will go to Tehran to exchange notes on how to find a solution to this issue.

India will probably use the Rupee instead of the dollar for trade...
 

shame shame Indian government.... India must stand with Iran...

And Iran must be neutral to Kashmir Issue... India and Iran have common enemies (USA and terrorists)
 
alam.saquiba said:
shame shame Indian government.... India must stand with Iran...

It's business, India needs the oil. It's going to find another way. As per the above article

justanobserver said:
It meant payments will be made to Iranian firms for the oil which India buys, and they will not be stopped.

ACU route was abandoned because of lack of transparency. Alternative is to use another currency (other than $)

http://www.telegraphindia.com/1101231/jsp/nation/story_13373947.jsp

Some reports even suggested rupee as an alternative much like South Korea which pays Iran in Korean won to break the deadlock that threatens to stall supplies from Indias second-largest source of oil imports
 
I remember a while ago I had said that GOI will back out of all the deals with Iran at a moments notice because of uncle sam. And at that point I was told by our indian friends here that no our country has an independent policy, and dont follow any ones instructions. Well I was right after all!

No you are not right.

We will back out, if appropriate sweeteners are given to us which will help in the progress of India.

That does sound like a sound foreign policy.
 
Karthic Sri said:
We will back out, if appropriate sweeteners are given to us which will help in the progress of India.

Again it's all business. But, Iran is a major supplier of Oil so we're probably gonna stick with them (using an alternative route)
 
Again it's all business. But, Iran is a major supplier of Oil so we're probably gonna stick with them (using an alternative route)

yeah dude , these ppl love to exxagerate the influence US has on India and thats why my reply.

It will be business as usual. :coffee:
 
This is what Iran gets if they poke their nose in Kashmir issue and India's internal issues...

no Boy,
This is what you GET after Uncle sams pokes his "Interest" into India.

Iran realized what was going on, and tried to make a smart move
by issuing those statements on Kashmir, just inorder to prepare Pakistan since India was not a lost cause.

Ain't gonna happen.
 

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