With the U.S. making it difficult for Asian countries including India to make payments for oil imported from Iran, it has been a “hard struggle” to channelise the funds through other routes, according to the Iranian Ambassador to India Syed Mehdi Nabizadeh.

Iran is a major source of oil for India, accounting for about 10 per cent of its energy imports.

Pointing out that the transfer of money from India to Iran for oil imports was one of the most important aspects of Indo-Iranian ties, the Iranian envoy said the two countries were facing difficulties on this front for two years, with last year being the hardest.

“Some countries have been acting out of context of the U.N. resolutions against Iran. For example, banking relations is out of the framework of U.N. resolutions, but unfortunately some countries do not think so. First, American influence in Europe affected the easy flow of oil money. Later they tried to push Asian countries to follow this trend. It culminated in affecting the Asian Clearing Union,” he told The Hindu.

(On December 31 last year, the Reserve Bank of India barred Indian companies from using the ACU to process current account transactions for oil and gas imports — a decision that has affected Indian energy imports from Iran. The ACU has nine members: India, Pakistan, Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka, Myanmar and Iran. India began using the ACU to avoid being targeted by U.S. extra-territorial sanctions. But since the U.S. is unable to monitor ACU transactions, it had been insisting on shutting down this route.)


However, Government sources said companies can't deal with the American and European companies if they have invested over $20 million in Iran. They said India and Iran had tried out several options but few have been effective for long. The first was to emulate the Turkish-Iranian model of making payments but was rejected because of the asymmetry of trading patterns. They then tried to route the payments via the United Arab Emirates but the “conditionalities” attached to the transactions made the option a non-starter. After the Moscow route was given up under pressure, South Korea (another major oil importer from Iran) was tried but it didn't work out. So far India is understood to have paid half of the outstanding dues.

The Iranian Ambassador pointed out that the ACU was formed to facilitate trade so that member-nations could have the benefit of money circulating among themselves. Most of this money was from oil trade. “Unfortunately due to U.S. interference, this channel was closed. Since then it has been a hard struggle to channelise payments through other routes,” he observed.

The envoy traced the “downfall in ties” to the resumption in negotiations on the Iran-Pakistan-India (IPI) pipeline in 2006. In addition, some U.N. resolutions also slowed down cooperation.

However, optimistic of bilateral ties turning the corner, he hoped both countries would cooperate in areas such as nano-technology, biotechnology, aerospace and composites. “I hope the ground would be paved for cooperation in these areas but unfortunately since 2006 there has not been much activity on increasing cooperation.”

Bilateral trade this year is expected to tumble from last year's $14.9 billion to $13.3 billion with most of the decline taking place in non-oil trade.


Bad news for oil-importing nationsDecember 24, 2011