Reports that the State Bank of India is no longer honouring letters of credit from Iranian importers of Indian products suggest the Manmohan Singh government is giving in to the extra-territorial pressures Washington is exerting on countries around the world to sever commercial relations with Tehran. Under international law, India and Indian entities are obliged to follow only the mandatory sanctions imposed by the United Nations Security Council — not unilateral sanctions or prohibitions announced by the United States. In March 2007, the UNSC prohibited some arms sales and ordered the assets of Bank Sepah, Iran’s fourth largest bank, frozen; but none of its other decisions limits the ability of Indian and Iranian companies to trade with one another. Last month, however, the Bush administration imposed unilateral sanctions against three other Iranian banks — Bank Melli, Bank Mellat, and Bank Saderat — effectively using the Treasury Department’s domestic powers to prohibit third country transactions with those three entities from running through the U.S. financial system. It is apparently this prohibition that has given the SBI and the Indian Finance Ministry cold feet over discounting Iranian LCs.
When a compromising government is incapable of safeguarding the independence of the nation’s foreign policy, is it any wonder that Indian companies should capitulate to unreasonable demands from different branches of the American establishment? Earlier this month, India’s Essar group walked away from a potential multi-billion dollar refinery venture in Iran because the Republican Governor of Minnessota — where Essar Global had just closed a deal for the establishment of a $1.65 billion steel plant — waved his finger at them, threatening the withdrawal of $67 million in state subsidies as well as the withholding of planning permission. In an increasingly complex and globalised world, it is unacceptable that the U.S. should attempt to dictate to countries and companies where they can and cannot do business. It is not as though the government has no choice. One model is European Council Regulation (EC) No 2271/96 of 22 November 1996 protecting European entities from the Helms-Burton and Iran-Libya Sanctions Acts and making it illegal for them to follow U.S. law on this. A country of India’s size and resilience should have the backbone, the political wisdom, and the diplomatic agility to stand up and defend its interests everywhere — and not feel obliged to sacrifice one set of friends in order to gain the friendship and trust of others. The signal needs to come right from the top. This is precisely the kind of editorial concern this newspaper has sought to highlight in analysing the wider ramifications and not-so-hidden costs of the Indo-U.S. nuclear deal — as part of a developing strategic partnership.