Mood Upbeat on Iranian Trade Tour of India

Sruthi Gottipati – Wall Street Journal May 9, 2012

It was hard not to be amused by the odd diplomatic spectacle in New Delhi this week, which saw Secretary of State Hillary Rodham Clinton in town trying to convince India to stop importing oil from Iran – even as an Iranian trade delegation was here trying to drum up more business.

Despite the strange geopolitics, many Indian analysts argue that increasing trade with Iran is a good idea, and one that does not defy U.S. sanctions intended to pressure Iran to stop its nuclear program. The Iranian delegation included 56 people, including some members of the country’s biggest chamber of commerce, as well as businessmen looking for deals.

At a morning reception Tuesday, sponsored by the Associated Chambers of Commerce and Industry of India, or Assocham, the mood was upbeat, with officials and business people from both countries advocating a reduction in tariffs, easing visa restrictions and encouraging investment.

“With a liberal business visa regime, more direct flights, trade fairs and exhibitions, the bilateral trade can be increased by at least 10 billion dollars in the near future,” said Yahya Al Eshagh, president of the Tehran Chamber of Commerce, Industry and Mines, according to an Assocham statement.

Part of what is shaping the India-Iran trade talks are the banking restrictions put in place by the U.S. sanctions. India, while working to reduce imports of Iranian oil, has devised a payment mechanism to pay for the oil it continues to buy. Under this plan, Iran has agreed to accept rupees as payment for almost half of India’s oil purchases – yet that arrangement also means that Iran, in turn, will spend much of those rupees on Indian exports or on investment inside India.

At the same time, Iran wants Indian investments, too. According to the Assocham statement, Iran was “keen to invite Indian investments in road construction and railway networks.”

Beyond trade, India and Iran share common regional interests, which is why the Indian side has been reluctant to take an overly confrontational stance regarding the sanctions. For years, India and Iran have explored developing a trade corridor, through which Indian ships could dock at an Iranian port and connect to a highway leading into Afghanistan and central Asia. The project is still mostly under discussion, but Indian officials regard such a linkage as a potentially important route to bypass Pakistan into Afghanistan.

Mr. Eshagh said such trade routes could further boost business between Indian and Iranian companies. Meanwhile, Arvind Mehta, a senior official at the ministry of commerce and industry, told the audience at the Assocham conference that Iranian companies should consider setting up manufacturing bases in India and exporting their products to various countries.

India imported 22 million tons of Iranian crude oil in 2009-2010, worth about $10 billion, making it Iran’s third-largest crude market, according to the last official data available.

Anil K. Agarwal, an officer with Assocham, said the longstanding payment problem with Iran has been resolved and now India should focus on increasing exports – especially of agricultural commodities like wheat, rice and sugar.

India is reported to be Iran’s largest rice supplier.

“India can also supply construction equipment, building material and hardware, pharmaceuticals, telecom products, textiles, automobiles and spare parts,” said Mr. Agarwal. “On the other hand, we can import crude oil, fertilizers, zinc, copper, iron, coal, uranium and manganese. India also requires natural gas, which is in abundant supply in Iran.”

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