India will walk a diplomatic tightrope next week when it plays host to US Secretary of State Hillary Rodham Clinton at the same time as a large Iranian trade delegation visits seeking to circumvent tough US sanctions that have strangled Iran’s economy.
The energy-hungry South Asian nation has publicly rejected Western sanctions, but has privately pushed refiners to cut imports of oil from Iran by 15 percent to 20 percent — enough, it hopes, to win a waiver from Washington during Clinton’s two-day visit.
“She might announce a waiver for us ... India has done enough to get that,” an official privy to Indian talks with Iran and the US said.
The US in March granted exemptions to Japan and 10 EU nations from its sanctions, which are aimed at pressuring Tehran to end its nuclear program.
India and China, Iran’s biggest buyers of crude, remain on a list at risk if they do not cut oil imports “substantially.”
The US and EU sanctions have made paying for Iran’s oil difficult for India, which is using a Turkish bank currently and the two sides have set up a rupee mechanism for about 45 percent of the US$11 billion a year oil imports.
The rupee mechanism has up to now only been used to clear a backlog of export debts and payments so far total 3.8 billion Indian rupees (US$71.10 million).
Today, a 56-member Iranian delegation led by Iranian Chamber of Commerce president Yahya Al Eshagh is scheduled to arrive for another round of talks over what India can sell to Tehran.
Exporters also want clarity on the latest tightening of US sanctions that target foreigners helping Iran evade sanctions and bar them from access to the US banking system.
“The Indian government should take up the matter with Hillary Clinton ... it is an infringement of the sovereignty of a nation. We are in the rupee system ... we are not in the US banking system,” said Shahrukh Khan, a governing body member of the India-Iran Chamber of Commerce and Industry.
Exports of essentials such as food and medicines to Iran are exempted from the UN’s sanctions which India abides by. The Iranian delegation includes food and pharmaceutical companies, but also machinery makers, steel companies and petroleum product manufacturers.
Trade between the two is also facing difficulties with the rupee mechanism which uses an account in India’s UCO Bank for payments to exporters.
In the past, Indian exporters received advance payment if documents pertaining to an order were in line with the terms and conditions of letters of credit. Advance payments are particularly attractive as the Iranian currency weakens and financing comes under further pressure.
“How can you expect a trade of US$4.5 billion magnitude to transact? Only those who want to take a risk and wait for payment for two months are using the rupee account facility,” Khan said.