The two sides likely to touch on joint efforts to combat piracy off Gulf of Aden

India and Iran plan to hold intensive discussions on bypassing Western sanctions on Tehran's oil trade during Iranian Foreign Minister Ali Akbar Salehi's two-day visit from Thursday. The two sides are also likely to touch on joint efforts to combat piracy off the Gulf of Aden which has impacted their merchant shipping operations.

Dr. Salehi will primarily be here to hand over a letter from President Mahmoud Ahmadinejad to Prime Minister Manmohan Singh inviting him to attend the Non-Aligned Summit in Tehran this August.

Although Dr. Salehi will meet National Security Advisor Shivshankar Menon and External Affairs Minister S.M. Krishna, he is also keen to meet Finance Minister Pranab Mukherjee to take forward discussions on hammering out a system for utilising Indian rupees that would be part payment for Iranian oil.

Mr. Mukherjee had helped smoothen the path for trade between the two countries by declaring himself to be in favour of granting tax exemptions on rupee payments made to Iranian oil companies.

This interaction as well as the scheduled one over lunch with Mr. Krishna would help in the deliberations of an Indian banking delegation which will visit Tehran in the third week of June to work out the modalities of paying for about half of Iranian oil in rupees and then Tehran using this amount to buy Indian goods.

Diplomats described the atmospherics for the interaction as favourable after two days of talks on consular issues which they said were “result oriented.”

When contacted, Ambassador of Iran to India Sayed Mehdi Nabizadeh saw India and Iran taking the lead through these discussions in coming to grips with difficulties and irritants in local currency exchange. Their experience will come in useful for the BRICS (Brazil, Russia, India, China and South Africa) which have resolved to move over to trade in local currency with each other from next year.

“During our talks [on rupee trade] many questions and doubts will come out. This will impact positively on the BRICS' plans in this direction and could go on to include the whole of Asia,'' he said while counselling patience.

“We should not be in a hurry to see the beginning of the end. The difficulties will show themselves,'' he felt while pointing out that in three rounds of earlier talks, both sides have felt that rupee and rial need to have “some basis.” There are other technical issues that need to be discussed such as a new model for opening letters of credit (LCs).

India has been reducing oil imports from Iran but claims this is due to technical reasons rather then pressure from the U.S. Due to Western restrictions on transferring money to Iran for importing oil, India has struggled to make payments. It had to shift from one banking channel to another as the previous one would be shut down.

Besides discussing the regional and international situation including the state of play after two rounds of nuclear issue related talks with P-5 + 1 (five UNSC permanent members and Germany) with Mr. Menon, the Iranian Foreign Minister will also discuss the progress made in developing two transit routes to Central Asia, Russia, the Persian Gulf and, after seven years, even to China.

India is an interested party in the North-South corridor along with 15 other countries. It is the main motivator for the second route which will go via Afghanistan into Central Asia by utilising the Iranian port of Chahbahar.

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