India Explores Economic Opportunities in Iran, Denting Western Sanctions Plan

Rick Gladstone – New York Times February 9, 2012

India emerged as a major new irritant on Thursday in Western efforts to isolate Iran, announcing that it was sending a large trade delegation there within weeks to exploit opportunities created by the American and European antinuclear sanctions that are increasingly disrupting Iran’s economy.

The trade delegation announcement coincided with new reports that India, an important consumer of Iranian oil, had eclipsed China for the first time as Iran’s No. 1 petroleum customer last month, subverting efforts by the United States to persuade other countries to find non-Iranian sources for their energy needs or risk onerous penalties under a new American sanctions law.

The announcement also came ahead of a planned visit to India by Herman Van Rompuy, the European Union president, who was quoted in an interview with The Times of India as saying that he intended to seek the Indian government’s help in pressing Iran to give up its nuclear program.

It was unclear whether Mr. Rompuy knew at the time of the interview that India’s commerce secretary, Rahul Khullar, was about to announce a big economic push into Iran that could serve to counteract the effects of the very sanctions Mr. Rompuy has helped to promote.

“We will be mounting a mission to Iran at the end of the month to promote our own exports,” Mr. Khullar told reporters in New Delhi, according to Indian and Western accounts of his news conference. “A huge delegation will be going.”

In what amounted to a rejection of an underlying motive in the American-European sanction effort, Mr. Khullar said India already was honoring the four rounds of United Nations sanctions aimed at dissuading Iran from its uranium enrichment program. Those sanctions, he told reporters, do not apply to “a vast range of products which India can export to Iran.”

Even if the United States and European Union wished to shun business with Iran, Mr. Khullar said, “Tell me why I should follow suit?”

“Why shouldn’t I take up that business opportunity?” he asked.

The American and European sanctions are primarily aimed at Iran’s central bank and oil industry. But they have begun to cause shortages, inflation and payment problems in Iran for a variety of other commodities by preventing Iran from making shipping, insurance and finance arrangements for imports.

The sanctions already had caused India and Iran difficulties on how to bypass new banking obstacles that had prevented India from paying Iran’s oil bills.

In addition to the trade delegation news, the Indian newspaper The Economic Times reported Thursday that the Indian government had proposed a barter with Iran in which India would pay for some Iranian oil with Indian wheat. And Reuters reported that Iran was willing to accept rupees instead of dollars, the standard currency in oil transactions, for nearly half of the roughly $11 billion worth of oil that India buys from Iran annually.

India’s attitude was welcomed by Iran, which has denied Western accusations that its uranium enrichment efforts mask a weapons program and has called the sanctions an attempt to bully the Iranian people into surrendering their legitimate right to peaceful nuclear energy.

Iranian news agencies prominently reported Thursday that Iran’s crude exports to India had increased to 550,000 barrels a day in January, partly offsetting a reduction by China, which has long been Iran’s top buyer, to 250,000 barrels a day. Those figures, first reported by The Wall Street Journal, showed that India was “ignoring recent sanctions imposed by the U.S. and E.U. on importing Iran oil,” the semiofficial Fars News Agency said.

Iran economic experts said the proposed India-Iran barter arrangement might be replicated by Iran and its other trading partners as a way to bypass the Western sanctions, particularly those that affect the payment abilities of Iran’s central bank.

“Iran will barter oil for food, oil for cars,” said Djavad Salehi-Isfahani, an economist at Virginia Tech University. “They will find ways.”

India’s possible role as a sanctions spoiler has not been lost on American lawmakers who have been aggressively seeking to penalize Iran. At a confirmation hearing on Tuesday before the Senate Foreign Relations Committee, President Obama’s nominee for ambassador to India, Nancy J. Powell, was bluntly questioned about the Iran issue by Senator Robert Menendez, a New Jersey Democrat who has helped push through some of the toughest sanctions on Iran.

The Indian government, Mr. Menendez said, “seems to be rebuking the sanctions and looking for workarounds.” Asked by Mr. Menendez what she would do about it, Mrs. Powell, a veteran diplomat, responded that she understood that “this is going to be a very important topic and one of those that I will be dealing with very seriously and very early in my tenure.”

Artin Afkhami contributed reporting.

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