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  • U.S. May Sanction India Over Level of Iran-Oil Imports


    By Indira A.R. Lakshmanan and Pratish Narayanan - Mar 15, 2012 7:13 PM GMT+0530

    India has failed to reduce its purchases of Iranian oil, and if it doesn’t do so, President Barack Obama may be forced to impose sanctions on one of Asia’s most important nations, Obama administration officials said yesterday.
    A decision to levy penalties under a new U.S. law restricting payments for Iranian oil could come as early as June 28, according to several U.S. officials who spoke on condition of anonymity because of the sensitivity of the issue.
    Enlarge image
    Barack Obama., U.S. president. Photographer: Joshua Roberts/Bloomberg

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    March 15 (Bloomberg) -- Alejandro Barbajosa, an oil markets specialist and business development manager at Argus Media Inc., talks about oil supply disruption and the role of the International Energy Agency. He speaks from Singapore with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)
    “Given the level of trade, and in particular oil, between Iran and India, targeting an Indian entity that facilitates Iran’s access to the international financial market should be top of mind for the U.S. Treasury,” Avi Jorisch, a former Treasury Department official who is now a Washington-based consultant on deterring illicit finance, said in an interview.
    The U.S. law, which targets oil payments made through Iran’s central bank, applies to any country that doesn’t make a “significant” reduction in its Iranian crude oil purchases during the first half of this year. If India fails to cut Iranian imports sufficiently, Obama may be compelled to bar access to the U.S. banking system for any Indian bank processing oil payments through Iran’s central bank, the U.S. officials said.
    While India hasn’t asked its refiners to stop purchasing Iranian crude, the government has told processors in the South Asian nation to seek alternate supplies and gradually reduce their dependence on the Persian Gulf state due to increasing pressure from the U.S. in recent weeks, three Indian officials with direct knowledge of the situation said today.
    No Significant Reduction
    India hasn’t significantly cut imports this year because refiners’ annual crude term deals with Iran typically run from April to March, they said. The planned reductions will start only when new annual contracts begin next month, the Indian officials said, declining to be identified because they aren’t authorized to speak to the media.
    India bought an average of 328,000 barrels a day of Iranian crude in the first six months of last year, making it the No. 3 buyer, behind China and Japan and ahead of South Korea, according to the U.S. Energy Information Administration. Iran is the No. 2 producer in the Organization of Petroleum Exporting Countries.
    The U.S. government may not be aware that India’s biggest buyer of Iranian oil, state-owned Mangalore Refinery & Petrochemicals Ltd. (MRPL), plans to import less from Iran starting next month, according to two officials with direct knowledge of the matter who spoke on condition of anonymity because they weren’t authorized to speak.
    Unilateral Sanctions
    Oil Minister S. Jaipal Reddy, Finance Minister Pranab Mukherjee and Foreign Secretary Ranjan Mathai have said India will continue to buy Iranian oil to meet its growing energy needs. While the Indian government has an excellent record of enforcing United Nations sanctions on Iran, India has objected to unilateral U.S. sanctions, according to U.S. officials.
    “We abide scrupulously by UN authorized sanctions,” Indian Foreign Ministry spokesman Syed Akbaruddin said in a telephone interview. While restrictions imposed by individual countries “have an impact on commercial interactions, from a legal perspective there is nothing that binds us to follow them.”
    Oil Purchases Rise
    The latest shipping data shows India and South Korea sharply increased oil purchases from Iran in January, according to a report released yesterday by the International Energy Agency in Paris. China halved its imports from Iran, from 550,000 barrels a day in December to 275,000 barrels a day in January, following a dispute over pricing terms that has now been resolved, the report said.
    The new U.S. law targeting Iranian petroleum transactions doesn’t specify by what percentage a nation must reduce its Iranian oil imports to qualify for an exemption from sanctions. U.S. officials, speaking on condition of anonymity, said they are looking for cuts of around 15 percent in volume, though they might consider whether buyers have extracted significant price discounts, thereby depriving Iran of revenue.
    Mangalore Refinery may cut its contract to 6 million metric tons, or 120,000 barrels a day, in the year ending March 2013, which would be a 15 percent cut from the previous year, one of the people with knowledge of the planned reductions said.
    U.S. Offer
    The U.S. has offered India help in brokering deals with alternative suppliers including Iraq and Saudi Arabia, which has offered to replace any shortfall, according to U.S. and Indian officials.
    Envoys from the White House, the State Department, the Treasury Department and the U.S. Embassy in India have had numerous conversations with Indian counterparts since Congress began debating the sanctions measure that Obama signed into law Dec. 31.
    Nancy Powell, the Obama administration’s ambassador- designate to India, testified before Congress last month that if confirmed, she would be “spending a great deal of time” working with India on Iran sanctions issues. She quoted Mathai, who came to Washington for meetings last month, as saying India is working to diversify its sources of petroleum and reduce its dependence on Iran to no more than 10 percent of its total oil imports.
    “That would be a very good sign,” Powell said.
    Disrupting Shipments
    U.S. and European Union sanctions are already disrupting Iranian crude shipments to global refiners, contributing to a 16 percent advance in London-traded Brent this year. Brent oil for April settlement fell $1.25, or 1 percent, to end the session at $124.97 yesterday on the London-based ICE Futures Europe exchange.
    The EU decided two months ago to embargo Iranian oil imports effective July 1. Last year, the 27-member EU was collectively the No. 2 importer of Iranian oil, taking 18 percent of Iran’s crude exports. Faced with a shrinking pool of buyers, Iran last month offered India additional crude supplies on revised terms.
    China’s Ministry of Foreign Affairs has criticized sanctions on Iranian oil. China’s crude imports from Iran hit their lowest level in five months in January, customs data show, as the country’s biggest buyer, China International United Petroleum & Chemical Co. (0119173D), known as Unipec, delayed signing a new contract because of a dispute over payment terms. Unipec cut its 2012 term contract purchases by 15 percent from 2011, though the payment dispute has since been resolved.
    Japan, Korea
    For their part, Japan and South Korea are seeking exemptions from the new U.S. sanctions. If both nations can demonstrate a significant reduction in their purchases by the end of June, their banks would escape penalties, according to two U.S. officials involved in the talks.
    Japan is seeking to reduce its crude purchases from Iran by at least 11 percent, according to a Japanese government official interviewed Feb. 21. The three largest Japanese buyers of Iranian crude are Showa Shell Sekiyu KK (5002), JX Nippon Oil & Energy Corp. and Cosmo Oil Co. (5007)
    The South Korean government has said it will make a decision on cutting Iranian crude imports by the end of June. South Korean officials denied reports saying they had already proposed cutting imports by 15 percent to 20 percent.
    The White House doesn’t want to punish Japan, South Korea or India, critical U.S. partners in trade and security and important regional counterweights to the rise of China, U.S. officials said. Still, the president has limited leeway to grant exemptions under the law, and so far, India hasn’t demonstrated reductions, they said.
    Free Pass
    Mark Dubowitz, the executive director of the Foundation for the Defense of Democracies in Washington and an adviser to the administration on sanctions, said India shouldn’t assume it will avoid sanctions unless its refiners demonstrably reduce imports over the next three months.
    There’s no reason “why India should be given a free pass as the EU, Japan and others significantly reduce the scale and scope of their Iranian trade,” he said in an interview. “No country should be confident that it will not be the target of U.S. sanctions.”
    Other analysts said Indian officials have responded to U.S. pressure by quietly pressing state-run refiners to switch to alternative sources, and they expect the U.S. to reach an accommodation with the world’s most populous democracy.
    “It’s highly unlikely that the U.S. would sanction India on this issue. The Iran issue is an irritant at best,” Harsh V. Pant, a specialist on India and Iran at King’s College London, said in a telephone interview.
    The Iranian central bank sanctions that Obama signed into law Dec. 31 are part of a larger effort to deprive the Persian Gulf country of its leading source of revenue and complicate Iran’s commercial ties with the outside world. The U.S. and the EU have piled on new sanctions since November in an effort to pressure Iran to abandon any work it may be conducting to acquire a nuclear weapons capability. Iran insists that its nuclear program is strictly for civilian energy and medical research.
    To contact the reporters on this story: Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net; Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net
    To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net
    Source: U.S. May Sanction India Over Level of Iran-Oil Imports

    What will happen now ? Will US of A try to piss it's biggest ally in Asia ?

  • #2
    News flash. India and the US are not allies.

    Comment


    • #3
      Originally posted by Officer of Engineers View Post
      News flash. India and the US are not allies.
      Sir, Maybe I should have phrased it biggest 'supporter' ?

      Comment


      • #4
        In what way? Japan is the US biggest ally in Asia. China does far more business with the US than India. NATO does far more strategically in Asia (ie, Afghanistan) than India. When you come right down to it, India is not that high up on the US's radar ... and that is a choice by both countries.

        Comment


        • #5
          Originally posted by Officer of Engineers View Post
          In what way? Japan is the US biggest ally in Asia.
          I agree. But India is a bigger market than Japan for US products so that might change in the future and India will be a far big supporter.

          Originally posted by Officer of Engineers View Post
          China does far more business with the US than India.
          US of A knows China is a growing threat for their dominance in Asia. In the case of India US of A knows it might not be the case.

          Originally posted by Officer of Engineers View Post
          NATO does far more strategically in Asia (ie, Afghanistan) than India.
          NATO can't just settle in Afghanistan ( or can they ?) they have to move someday for sure.

          Originally posted by Officer of Engineers View Post
          When you come right down to it, India is not that high up on the US's radar ... and that is a choice by both countries.
          But actions by Obama administration is different from what you are saying Sir. India is definitely high on the US radar. It can't rely on Pakistan , even if US of A wants to keep things smooth the growing animosity in Pakistan against US of A might move Pakistan completely towards China. Vietnam , Taiwan and the countries alike maybe good enough to irritate China every now and then but US of A needs a strong partner in the Asia through which it can have a dominant voice and to keep China in check.
          Last edited by commander; 15 Mar 12,, 19:22.

          Comment


          • #6
            Originally posted by commander View Post
            I agree. But India is a bigger market than Japan for US products so that might change in the future and India will be a far big supporter.
            Not really. Look at the numbers taken from this site: Foreign Trade - U.S. Top Trading Partners

            US trade with Japan for year of 2011 is: Exports to Japan 66,168.3 and imports from Japan is 128,811.3. Japan is ranked 4th on US's trading partners

            US trade with India for year of 2011 is : Exports to India 21.6 to India and imports from India is 36.2. India is ranked 13th on US's trading partners.

            Japan imports 3 times what India imports from US.

            US of A knows China is a growing threat for their dominance in Asia. In the case of India US of A knows it might not be the case.
            Japan and S. Korea are far better candidates than India will be to check China's rise in Asia-Pacific region.


            NATO can't just settle in Afghanistan ( or can they ?) they have to move someday for sure.
            And India shows no inclination to help out NATO in that respect.


            But actions by Obama administration is different from what you are saying Sir. India is definitely high on the US radar. It can't rely on Pakistan , even if US of A wants to keep things smooth the growing animosity in Pakistan against US of A might move Pakistan completely towards China. Vietnam , Taiwan and the countries alike maybe good enough to irritate China every now and then but US of A needs a strong partner in the Asia through which it can have a dominant voice and to keep China in check.
            All talk and nothing else.

            Comment


            • #7
              There is no legal obligation for India to comply with a domestic US law. This wasn't sanctions authorized by the UN. I guess, if the United States places restrictions on Indian banks then India can also do the same to US banks. Honestly, is Iranian sanctions worth trying to start a trade war with a large economy like India? That is 44 billion in bilateral trade.
              Last edited by Dago; 15 Mar 12,, 20:03.
              sigpic

              Comment


              • #8
                Originally posted by Dago View Post
                There is no legal obligation for India to comply with a domestic US law. This wasn't sanctions authorized by the UN. I guess, if the United States places restrictions on Indian banks then India can also do the same to US banks. Honestly, is Iranian sanctions worth trying to start a trade war with a large economy like India? That is 44 billion in bilateral trade.
                Place restrictions on indian banks, that do business with Iran's central bank. Indian banks that do not do any business with Iran remain unaffected. So use Indian banks that do not do business in the US.

                What is unclear is this talk about 'sanctioning countries', from my understanding thats a new one.

                American exemptions are only valid for six months.

                Comment


                • #9
                  Originally posted by Dago View Post
                  There is no legal obligation for India to comply with a domestic US law. This wasn't sanctions authorized by the UN. I guess, if the United States places restrictions on Indian banks then India can also do the same to US banks. Honestly, is Iranian sanctions worth trying to start a trade war with a large economy like India? That is 44 billion in bilateral trade.
                  That is true but the question is can USA afford to do without India if it decides that Iran is a strategic threat? In all cases, the analysis is yes, America can do without India. Sure it will piss off India and India would be worse off if India decides to retaliate by imposing sanctions on US companies tit for tat.

                  Me personally? I think India should tell USA to fuck off and mind its own business and do whatever it wants to do wrt Iran. After all, USA never played ball on issue of Pakistan with India. India should return the favor.

                  If India wants to be smart about it, then India should create shell companies that only deals with Iran and nothing else and trade in rupees or barter goods. That way, Indian companies that deals with other countries and USA won't suffer sanctions.

                  Comment


                  • #10
                    A good step by the US.

                    A big setback to the pro-US lobby in India.
                    Cow is the only animal that not only inhales oxygen, but also exhales it.
                    -Rekha Arya, Former Minister of Animal Husbandry

                    Comment


                    • #11
                      Originally posted by Tronic View Post
                      A good step by the US.

                      A big setback to the pro-US lobby in India.
                      Not only that but if USA slaps sanctions, it will kill any hope that the US nuclear industry have to do business with India. France and Russia will now get the lions share of the nuclear business.

                      Comment


                      • #12
                        Originally posted by Blademaster View Post
                        That is true but the question is can USA afford to do without India if it decides that Iran is a strategic threat? In all cases, the analysis is yes, America can do without India. Sure it will piss off India and India would be worse off if India decides to retaliate by imposing sanctions on US companies tit for tat.

                        Me personally? I think India should tell USA to fuck off and mind its own business and do whatever it wants to do wrt Iran. After all, USA never played ball on issue of Pakistan with India. India should return the favor.

                        If India wants to be smart about it, then India should create shell companies that only deals with Iran and nothing else and trade in rupees or barter goods. That way, Indian companies that deals with other countries and USA won't suffer sanctions.
                        In fact India already started to do both ( Kinda :) )


                        Iran starts paying Indian exporters in rupees

                        Fri Mar 2, 2012 9:38am IST
                        (Repeats story issue on March 1 with no changes)

                        * Mechanism to settle payments only to Indian exporters

                        * Indian oil buyers await tax waiver before using rupee

                        * India says not going along with U.S., EU sanctions

                        By Ratnajyoti Dutta

                        NEW DELHI, March 1 (Reuters) - India's exporters have begun receiving the first rupee payments from Iran, Indian government and trade sources said on Thursday, kicking off a mechanism to skirt Western sanctions which have made doing business with Tehran tougher.

                        About $3 billion in Iranian import arrears have accumulated since December 2010 when a previous payment conduit was closed under pressure from Washington, which is using sanctions to try to stop Tehran's contentious nuclear programme.

                        Payments to Indian exporters are being remitted through Iran's Bank Parsian which has opened an account with India's UCO bank, the sources said. Bank Parsian is among private Iranian banks that are free from sanctions against Iran's state-owned banks.

                        The agreement came after meetings between a visiting Iranian delegation and officials from India's finance and banking sectors over the past two days.

                        "Payments (to Indian exporters) have started coming very recently through Bank Parsian's account with UCO bank," said M. Rafeeque Ahmed, president of the Federation of Indian Export Organisations, the top exporters' body, told Reuters.

                        "Whatever has been stuck in the pipeline, that will be cleared."

                        Ahmed is taking part in government negotiations to find a solution to the payment problems that have hit trade between the two countries after U.S. sanctions on dollar deals. His organisation is a quasi-government body set up by the trade ministry.

                        Two government sources said the conduit through Bank Parsian and UCO bank was only to settle payments for Indian exports to Iran.

                        Indian oil importers have been paying for around $11 billion a year of crude since the middle of 2011 through Turkey's Halkbank, but this route would have been expensive for Iranian importers given sharp falls in the rial.

                        India was Tehran's second-biggest crude oil customer last year after China. Iranian oil accounts for about 12 percent of its needs.

                        Most of the Iranian arrears are for imports of iron and steel ($623 million), chemicals ($453 million) and cereals ($419 million), machinery ($143 million) and pharmaceuticals ($87 million).

                        Indian rice suppliers have also reported defaults by Iranian buyers and have said they are owed at least $144 million.

                        With payments for oil through Halkbank now looking vulnerable to fresh sanctions, India and Iran have agreed to settle 45 percent of this trade in rupees and boost exports to narrow their trade gap. Oil buyers are waiting for tax issues to be cleared up before they use the mechanism.

                        India abides by United Nations sanctions on Iran, but has refused to go along with new financial measures imposed by the United States and European Union that aim to punish Iran for its nuclear ambitions.

                        India has pushed back the visit of a delegation to Iran to March 10-14 from this month to explore boosting exports. Ahmed will be part of that team. (Additional reporting by Nidhi Verma; editing by Krittivas Mukherjee; Editing by Anthony Barker)
                        Source: Iran starts paying Indian exporters in rupees


                        India begins use of Chabahar port in Iran despite international pressure

                        By Rahul Bedi in New Delhi 12:57PM GMT 01 Mar 2012
                        Reacting to US Secretary of State Hillary Clinton's comments that the US was engaging in "very intense and very blunt" conversations with India and others like China and Turkey to stop importing oil from Iran in order to pressure Tehran over its covert nuclear programme, officials in New Delhi yesterday said they would not be "coerced" by any country.
                        And reinforcing its stand defying Western sanctions, India recently used Chabahar port in southeastern Iran for the first time ever to transport 100,000 metric tons of wheat to Afghanistan as part of its humanitarian aid to the war-torn country.
                        India helped build Chabahar a decade ago to provide it access to Afghanistan and Central Asia- banned by neighbouring nuclear rival Pakistan- and is involved in constructing a 560-mile long rail line from the Zabul iron ore mines in southern Afghanistan to the Iranian port.
                        Along with Iran and Afghanistan it also has an agreement to accord Indian goods, headed for Central Asia and Afghanistan preferential treatment and tariff reductions at Chabahar, an arrangement it plans to exploit imminently.
                        A defiant India was also dispatching a large trade delegation to Iran later this month to explore business opportunities created by Western sanctions.
                        Source: India begins use of Chabahar port in Iran despite international pressure

                        Comment


                        • #13
                          Actually, looking further into it; these "sanctions" don't matter much in India-Iran trade.

                          Looking at the fine print:

                          If India fails to cut Iranian imports sufficiently, Obama may be compelled to bar access to the U.S. banking system for any Indian bank processing oil payments through Iran’s central bank, the U.S. officials said.
                          U.S. May Sanction India Over Level of Iran-Oil Imports - Bloomberg
                          However, India has been playing it safe by trading with private Iranian banks which are not under sanctions, but even if they do go under sanctions;

                          Iran has agreed to accept 45 per cent of the value of its oil exports to India in rupees to be parked in UCO Bank. This bank, headquartered in Kolkata, was selected because it has no US or European exposure — its overseas presence is limited to Hong Kong, Singapore and China.
                          Sanctions on Iran: With UCO Bank, India works way out - Financial Express Mobile
                          Therefore these sanctions can do nothing to banks who aren't connected to the US banking system anyways.
                          Cow is the only animal that not only inhales oxygen, but also exhales it.
                          -Rekha Arya, Former Minister of Animal Husbandry

                          Comment


                          • #14
                            U.S. May Sanction India Over Level of Iran-Oil Imports
                            And some American commentators still wonder why India has rejected the US offers for the MMRCA tender.

                            Comment


                            • #15
                              Originally posted by Tronic View Post
                              Actually, looking further into it; these "sanctions" don't matter much in India-Iran trade.

                              Looking at the fine print:

                              However, India has been playing it safe by trading with private Iranian banks which are not under sanctions, but even if they do go under sanctions;
                              Pretty much what i said earlier.

                              Originally posted by Tronic View Post
                              Therefore these sanctions can do nothing to banks who aren't connected to the US banking system anyways.
                              Yes until i read that countries might get sanctioned. Is this just a general way of saying the above or something extra ?

                              Mark Dubowitz, the executive director of the Foundation for the Defense of Democracies in Washington and an adviser to the administration on sanctions, said India shouldn’t assume it will avoid sanctions unless its refiners demonstrably reduce imports over the next three months.
                              Why the talk about sanctions at all. Note how he mentions refiners. Regardless of which banks we use the above statement still holds true.

                              Comment

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