The Indian government has managed to avert a sanctions breach and pay off some of its US$4.8bn debt to Iran for oil supplies accrued since March 2011. India has handed over two-thirds of the debt to Iran, a government official has told the press.
Iran is the second largest oil producer in the world and is India’s principal supplier of petroleum, exporting around 400,000 barrels per day. Until December 2010, India had used the Asian Clearing Union to settle its payments with Iran. The nine member consortium was set up at the behest of the United Nations in 1974 to provide a clearing system for payments between the member countries in Asia and the Pacific. Under pressure from Washington, the Reserve Bank of India opted out of the clearing system late last year and instead channelled its funds through a branch of Europaisch Iranische Handelsbank in Hamburg, an Euro-Iranian bank based in the European Union.
The US sanctioned EIH in September 2010 and the EU followed suit in May 2011. The European sanctions on EIH closed this channel of payment to India. Nonetheless, since May, Iran has continued to supply oil and India has racked up an enormous debt which it was unable to pay as the US, in a game of cat and mouse, had managed to close the majority of payment gateways open to Iran. To pay its latest bills, India chose to do business with a bank based in Turkey according to sources in India. Halkbank is a state-owned bank.
When the next wave of pressure from Washington upon Turkey will arrive remains to be seen. One option left for India to continue making payments in Iran is under consideration. Both countries have discussed paying for oil in gold and will use this method if all others are blocked, a government offiical told the press. As sanctions are effectively blocking payments and financial transatctions from reaching Iran, the effects on the population are increasingly serious. The International Monetary Fund expects Iran’s gross domestic produce to drop to zero in 2011 and already the proce of gasoline has risen by 400 per cent. Look out for Compliance Knowledge Platform’s serialised chat on the impact of sanctions.
Published by the author on CKPblog (Tue, August 16 2011 12:37)