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India in talks to smoothen Iran crude oil supplies

03.22.2012  | 

India has shown no signs of giving in to US pressure to reduce its business dealings with Iran, with the government and a top trade body moving in quite the opposite direction. New Delhi is in talks with Iran to ensure uninterrupted crude oil supplies, as well as to smoothen settlement of payments.

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By RAKESH SHARMA and RAJESH ROY

NEW DELHI -- India on Thursday showed no signs of giving in to US pressure to reduce its business dealings with Iran, with the government and a top trade body moving in quite the opposite direction.

Foreign Minister S.M. Krishna, in a written reply to questions in the upper house of India's parliament, said that New Delhi is in talks with Iran to ensure uninterrupted crude oil supplies, as well as to smoothen settlement of payments.

"The government is studying the impact on India of the problems that have arisen due to imposition of sanctions against Iran," he added.

India, which imports about $12 billion worth of crude oil annually from Tehran, says it won't comply with the US and Europe sanctions against Iran.

Krishna reiterated this stand Thursday, saying that trade with Iran won't be affected.

This comes just two days after the US State Department said 12 countries - including India and China -remain at risk of facing financial penalties this year because of their continued purchases of Iranian oil.

The Iran debate has become a sore point for India-US relations, with Washington trying to exert pressure on New Delhi to curtail trade with Tehran.

But oil supplies from Iran are crucial for India, accounting for more than a 10th of its annual crude imports.

Also Thursday, a senior executive of a trade association told Dow Jones Newswires that India is aiming to more than double its exports of agricultural commodities and products such as medicines to Iran.

The US-led sanctions against Iran are "a good opportunity" for Indian exporters to fill the supply gap, said Ajay Sahai, chief executive and director general of the Federation of Indian Export Organisations.

"We hope to increase our trade with Iran to $6 billion" in the fiscal year starting April 1, he said. India's exports to Iran fell 6% in 2011 to $2.4 billion, mainly because of payment problems.

Iran accounts for around half of India's premier basmati rice exports, and is also a big buyer of its tea.

New Delhi and Tehran recently agreed on a system to bypass Western sanctions which have made payments difficult.

The new system allows India's oil importers to make 45% of their payments in rupees, which Iran will park in a local bank and use to settle payments to Indian exporters.

The problem arose after India's central bank in December 2010 barred Iran-related payments from being processed through the Asian Clearing Union, a regional clearing house which the US said was opaque and could be used by Tehran to finance its alleged nuclear weapons program.

The government started payments through Turkey's Halkbank in August last year, but this route may be cut off by the sanctions as well.

Also Thursday, Foreign Minister Krishna said that India is trying to diversify its sources of crude oil imports to cut dependence on any one region.

India's crude oil imports from Iran are expected to fall by 8% in the current financial year that ends March 31, to 340,000 bpd.


Dow Jones Newswires



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