In a move that is being seen worldwide as an example of India succumbing to American pressure, the Reserve Bank of India has barred companies from using the Asian Clearing Union (ACU) to process current account transactions for oil and gas imports — a decision that directly hits at Indian energy imports from Iran.
With American and European clearing houses unwilling to process payments involving the Iranian hydrocarbon sector, an urgent solution will now have to be found for the $11 billion worth of oil India imports annually from the Islamic Republic. Diplomatic sources told The Hindu that a senior official from the Central Bank of Iran will hold emergency talks with the RBI on Friday.
The ACU has nine members today: India, Pakistan, Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka, Myanmar and Iran. The nine countries settle payments for intra-regional transactions among participating central banks on a multilateral basis. Two years ago, Iran asked Indian companies such as ONGC to use the ACU to avoid being targeted by U.S. extra-territorial sanctions. But since the U.S. Treasury, which enforces those sanctions, is unable to monitor ACU transactions, Washington had been pressuring Delhi to shut down this route.
Before hitting upon the ACU, the Iranians had urged Indian companies to move over to the Turkey-Iran model of settling accounts. But because the trade is heavily imbalanced in Iran's favour, such a system is hard to implement.
The RBI's directive, issued on Monday, comes in the wake of official Indian indifference towards trade and investment opportunities in Iran. The Finance Ministry has dragged its feet for a year over the dispatch of a delegation to Tehran to explore ways of insulating the oil trade from western sanctions.
A few weeks ago, the India-Iran Joint Working Group met in Tehran with the express intention of attempting to advance cooperation between the hydrocarbon majors of both countries while keeping in view the sanctions regime. The discussions were inconclusive.
“When companies associating with the Iran oil sector are also dealing with the U.S. and EU, it becomes a problem. We have to find ways and means of addressing the issues that arise. Companies can't deal with the U.S. and EU companies if they have invested over $20 million in Iran,” government sources told The Hindu .
Reliance gives up plans
This led to Reliance abandoning plans to invest in an oil refinery in Iran as it saw diminished chances of participating in shale gas exploitation after having bought a stake in a U.S. company. It is now said to be looking for more acquisitions.
The sources did not say whether there was direct U.S. pressure on Indian companies to withdraw from Iran if they wanted to keep their prospects alive in the shale gas sector. But according to WikiLeaks, U.S. government officials had, in no uncertain terms, warned executives of France's Total and Italy's Eni SPA that investments in Iran “could possibly impact Total's recent shale gas investments in the U.S.” TheWall Street Journal recently reported that U.S. officials had made a similar pitch to the Indians.
