Trade with Iran grows in spite of UN sanctions

India’s joining the international action against Iran, including the fourth round of United Nations’ sanctions imposed last week, do not seem to be correlated to the growing economic relations between the two countries. Trade between India and Iran has increased from $2.2 billion in 2000-01 to over $13 billion in 2008-09.

The only blot seems to be the Iran-Pakistan-India gas pipeline project. India had been showing disinterest in the pipeline, but had sent requests for a bilateral official level meeting twice. There had been no response from Teheran on these yet, senior Indian government officials said. “We had proposed dates for talks earlier in May and again asked for dates from Iran earlier this month but have not received any response,” said an official.

The bilateral meeting was required to discuss issues relating to pricing, delivery point, project structure, payment of rates and transit fees for passage of the gas through Pakistan and security of supply. The Iranian cold-shouldering of the Indian request happened even as that country signed an agreement with Pakistan on Sunday for supply of 21 million cubic metres of gas from 2014.

Iran has already constructed 907 km of the gas pipeline, from the Asalooyeh Energy Zone to Iranshahr, while another 300 km from Iranshahr to the Pak border is being built. Pakistan would be constructing the stretch from the border to its pipeline hub at Nawabshah in Sindh province by 2014, when the supply is scheduled to commence.

A senior Iranian diplomat here said Iran welcomed India’s participation in the project and that the finalisation of dates for discussions takes time. “Such big things take time but once a pipeline is built, there are many customers. In Asia itself, there are so many buyers and India would miss the opportunity,” he said, adding that the gas could become costlier.

He said the two countries were negotiating 50-60 projects, mostly in the energy sector, involving an investment of $100 billion. “Sanctions on Iran have had no impact on bilateral trade and investment,” he maintained.

India buys about 75 per cent of its imported crude oil from West Asia. It imported 20 million tonnes of crude from Iran in 2009-10 and is expected to import a similar quantity this year, said a senior official in the ministry of petroleum and natural gas. He said the UN sanctions did not apply on sale of crude oil.

Private sector refiner Reliance Industries Ltd was exporting petroleum products to Iran but discontinued these last year after it came under the US Congress’ glare. Indian exports of items such as rice, minerals and pharmaceuticals continue. Amit Prasad, deputy director of the Federation of Indian Chambers of Commerce and Industry, said trade between the two countries had been growing in double digits, though the economic slowdown and the volatility in international crude oil prices led to only a two per cent increase in trade in 2008-09. “Indian exporters, though, have faced problems regarding opening of letters of credit (LCs), since the US had imposed sanctions on some Iranian banks. But two Indian banks are opening LCs in something called Asian Monetary Unit,” said Prasad.

Iran Finance Minister Shamseddin Hosseini is scheduled to visit India next month for a two-day joint ministerial commission meeting, 16th in a series. Bilateral trade will be part of the discussions, but it is unclear if any headway will be made on the pipeline, as Iranian oil minister is not part of the delegation.