New Delhi is looking at making payments in rupee denomination once the sanctions are in place as using dollar would not be feasible
India and Iran’s strategic infrastructure investment in Chabahar Port would fructify only if New Delhi is successful at obtaining a waiver from the US against its economic sanctions on Tehran, officials said.
“We need waiver to operate Chabahar Port otherwise it will be difficult… We need exemption,” a senior official from Shipping ministry told Moneycontrol. He further added that Ministry of External Affairs (MEA) is engaging with the US for the same.
New Delhi and Tehran entered into a contract in 2015 to construct two terminals at Chabahar Port along with cargo and container terminals.
“Participation in the Chabahar Port development will provide India an alternative and reliable access route into Afghanistan utilising India’s earlier investment in Zaranj-Delaram road built in Afghanistan,” said a statement released by MEA.
India began expanding its presence in Iran after the then US President, Barack Obama, lifted economic sanctions against the gulf country. Known as agreement among P5+1 (permanent members to the United Nations: the US, the UK, Russia, France and China + Germany), the European Union and Islamic Republic of Iran, the ‘Iran Nuclear Deal’ was a trade-off between dismantling of Iran’s nuclear might and opening economic gates to the country.
“Iran would redesign, convert, and reduce its nuclear facilities and accept the additional protocol (with provisional application) in order to lift all nuclear-related economic sanctions, freeing up tens of billions of dollars in oil revenue and frozen assets,” the joint statement issued by the parties involved read.
India’s problems arose when the present US president, Donald Trump, pulled out of the Iran deal and vowed to re-impose economic sanctions. While the first round of sanctions came into play from August, 2018, the final sanctions will come into effect from November 4, 2018.
Alternative payment mechanism
New Delhi is looking at making payments in rupee denomination once the sanctions are in place as using dollar would not be feasible.
“We need an alternative payment mechanism to avoid those sanctions,” another official said.
He said that India has roped in Bank Parasgad Iran (BPI), an Iranian private bank to route payments in the gulf country. The bank has a branch in Mumbai through which payments can be made.
“UCO Bank has shown reservations in resuming the old payment channel, while the finance ministry is not in favour of using IDBI,” officials were quoted as saying.
New Delhi is one of the largest importers of oil from Iran and thus sanctions on the country could jeopardise its energy requirements. The Centre is engaging with the US to obtain a waiver on the sanctions in order to continue dealing with Iran.
A US government official said in September that “the Trump administration was considering waivers for countries that were reducing their imports of Iranian oil”. While India has already reduced its import, it has indicated that it is unlikely to go down to zero given its massive energy needs.
“The United States is consulting with all of its friends and partners to discuss the implementation of the sanctions after the snapback...We recognise India has a need for significant oil imports,” Principal Deputy Assistant Secretary for the Bureau of South and Central Asia Region Alice Wells told news agency PTI a fortnight ago.
She said that the conversation between the US and Indian experts continues on the implementation of the sanctions and “exploring new supplies” of oil.According to a Reuters report , India could obtain waiver by the end of this month.The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .