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Kevin Brown
01 Jan 11,, 03:05
The Indian Government in recent weeks has moved to comply with international sanctions on Iran, specifically targeting deals in regards to large qaunities of oil and the transfer of sensitive technologies through the Asian Clearing Union. These moves as seen by observers are throught to be an attempt by India to further enhance and it's relations with the US, as well as to ease American concerns over Indo-Iran business dealings. In addition to further improving ties with Israel and the Gulf Arab countries in regards to these sanctions. However, this does pose issues for India as Iran is one of it's top oil providers.


WSJ: India joins U.S. on Iran efforts | POLITICO 44 (http://www.politico.com/politico44/perm/1210/ally_over_sanctions_877bcf50-bb30-46f4-834b-fb23d1f2fe25.html)

Double Edge
01 Jan 11,, 12:01
-self-delete dupe post-

Double Edge
01 Jan 11,, 12:12
These moves as seen by observers are throught to be an attempt by India to further enhance and it's relations with the US, as well as to ease American concerns over Indo-Iran business dealings. In addition to further improving ties with Israel and the Gulf Arab countries in regards to these sanctions.
Uh-huh, The actual RBI notification is here (http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6172&Mode=0)


2. In view of the difficulties being experienced by importers / exporters in payments to /receipts from Iran, the extant provisions have been reviewed and it has been decided that all eligible current account transactions including trade transactions with Iran should be settled in any permitted currency outside the ACU mechanism until further notice.

No mention of any sanctions or US in there so what does this RBI notification actually mean ? Another article from an Indian WSJ affiliate says (http://www.livemint.com/2010/12/31235743/India-Iran-try-to-work-out-an.html)


Iran’s deputy oil minister Ahmad Khaledi was quoted by his country’s semi-official Fars news agency as saying: “By changing the currency for oil transaction between Iran and India, the problem was solved.”

“In order to not allow Americans and Europeans to create any problem, we said let’s do our business in other currencies like (the United Arab Emirates’) dirham or (Japan’s) yen,” Khaledi was reported as saying.

That means both are looking at ways to do dealings in currencies other than $$ or euros.


However, this does pose issues for India as Iran is one of it's top oil providers.
It's the second biggest supplier to India after the Saudi's. Your referenced WSJ article (http://online.wsj.com/article/SB10001424052970203513204576046893652486616.html?m od=WSJ_hp_LEFTTopStories) says..


India imports $11 billion of crude oil annually from Iran—about 14% of its total crude import bill, according to government statistics. Iran is India's largest crude oil supplier after Saudi Arabia.

Read a few days back about concern that domestic fuel prices would rise as the implication was payments could not be settled for Iranian oil. But it was also mentioned that we possessed a 5 week reserve that would act as a buffer before payments could be reconfigured.

The express says (http://www.indianexpress.com/story-print/731131/)

Currently, Oil from Iran has four big importers and they are China, Japan, South Korea and India. Of these four, China and Japan already follow the European bank channel route. South Korea follows a currency-to-currency route, which is not financially viable for India because of its trade imbalance with Iran.

Kevin Brown
02 Jan 11,, 02:12
Uh-huh, The actual RBI notification is here (http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6172&Mode=0)



No mention of any sanctions or US in there so what does this RBI notification actually mean ? Another article from an Indian WSJ affiliate says (http://www.livemint.com/2010/12/31235743/India-Iran-try-to-work-out-an.html)



That means both are looking at ways to do dealings in currencies other than $$ or euros.


It's the second biggest supplier to India after the Saudi's. Your referenced WSJ article (http://online.wsj.com/article/SB10001424052970203513204576046893652486616.html?m od=WSJ_hp_LEFTTopStories) says..



Read a few days back about concern that domestic fuel prices would rise as the implication was payments could not be settled for Iranian oil. But it was also mentioned that we possessed a 5 week reserve that would act as a buffer before payments could be reconfigured.

The express says (http://www.indianexpress.com/story-print/731131/)

Ok Double Eagle,

From what I interpeted though in the WSJ article was that the Indian Government was going to regulate business with Iran to confirm more to international sanctions imposed against Tehran. But what your telling me is that all that is happening is that they are doing business in another set of currencies besides the dollar, however I thought the Iranian government was advising Indian and other companies to take this course of action to avoid issues?

Blademaster
02 Jan 11,, 09:01
Despite what America wants, India cannot afford to turn away from its second oil supplier. Its economy will suffer a serious spike of inflation in all sectors.

Double Edge
02 Jan 11,, 11:18
Ok Double Eagle,

From what I interpeted though in the WSJ article was that the Indian Government was going to regulate business with Iran to confirm more to international sanctions imposed against Tehran. But what your telling me is that all that is happening is that they are doing business in another set of currencies besides the dollar, however I thought the Iranian government was advising Indian and other companies to take this course of action to avoid issues?
I'm saying that i'm reading conflicting reports in the domestic press here. This issue is in flux so we might have to give it some more time to settle.

The express article linked to earlier does indicate US pressure but that the RBI reversed its stance two days later until an acceptable alternative could be worked out


Having restored the payments to Iran for oil imports two days ago, India is now urgently looking for alternative options to process payment to Iran for long-term basis.

The Reserve Bank of India, which had stopped Indian companies from using the Asian Clearing Union (ACU) to process current account transactions for oil and gas imports following US pressure, was asked to “restore” status quo in a high-level meeting early this week.

Following the decision, RBI executed what is called the “status quo ante” – a term used for restoring the status quo. In this case, it meant that payments will be made to Iranian firms for the oil which India buys, and they will not be stopped. In short, RBI’s move to stop payments was reversed.

This decision was taken keeping in view of India’s regular oil imports from Iran, which is one of the biggest sources for petroleum products.

However, having done that the government is now actively exploring alternative methods to process payments. And the most favoured route could be the commercial bank channels, sources said.

RBI issued two notifications.
The first (http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6163&Mode=0) stopped payments using the ACU on Dec 23, which your initial WSJ article picked up on.
The second (http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6172&Mode=0), asking for payments to be settled in other currencies on Dec 27

This is what caused the confusion :)

The Hindu says (http://www.thehindu.com/news/national/article1019039.ece?css=print)


Until 2008, payments under the ACU were made in dollars, but after the U.S. imposed sanctions on Iran, Euro was adopted. Recently, the European Central Bank (ECB) asked the RBI to certify that the Euro being used to import products were not on the U.S. sanctions list.

In the absence of the ACU, Iran and its crude supplier, National Iranian Oil Co (NIOC), are jittery over sales without the sovereign guarantee of the Central Bank. Furthermore, oil firms will have to find an alternative European bank that can accept payments on behalf of the NIOC. Friday's meeting is expected to focus on finalising a panel of banks through which payments could be made for Iranian imports. Officials reckon that finding an alternative bank for oil payments will be a difficult task, as EIH Bank of Germany, which facilitated transactions for the ACU members, has been brought under the U.S. sanctions.


A TOI article (http://timesofindia.indiatimes.com/articleshow/7202894.cms?prtpage=1) today, explains further...


NEW DELHI: India has landed itself in an Iranian pickle, largely of its own making.

It's long been known that India would find it unsustainable to remain in the Asian Clearing Union (ACU) for its oil payments to Iran.

Thanks to the US and EU sanctions, it was clear that Indian payments to Iran in either the dollar or the euro would stop sooner rather than later. Second, the ACU was a non-transparent way of payment, because since it was net payments by central banks, and there was no way in maintaining oversight on whom the payments were being made to, said Indian officials.

This meant that if it was found that Indian payments were going to Revolutionary Guard entities, which are under UN Security Council sanctions, India's compliance would take a beating. India would not risk that in an year when its entering the Council with hopes of a permanent berth.

But none of this was clarified to either the nation or, for that matter, to the Iranian's themselves. The government's cloak-and-dagger way of going about the entire issue, where the Reserve Bank of India even surprised the foreign office with its notification last week, left the government protesting weakly about its autonomous decision-making.