In­dia’s cen­tral bank asks coun­try’s len­ders to ef­fec­tively curb trade with Iran

The Pak Banker - - Front Page -

MUM­BAI: In­dia's cen­tral bank Mon­day asked the coun­try's len­ders to ef­fec­tively curb trade with Iran, a move which is seen as an in­di­ca­tion of New Delhi's grow­ing ties with Washington.

The Re­serve Bank of In­dia late Mon­day told the coun­try's len­ders to stop pro­cess­ing cur­rent ac­count trans­ac­tions with Iran us­ing the Asian Clear­ing Union ar­range­ment, a pol­icy which will in­crease deal costs and make trade cum­ber­some.

This comes days af­ter the cen­tral bank said that all pay­ments for the im­port of oil or gas should be set­tled in any per­mit­ted cur­rency out­side the ACU mech­a­nism on Fri­day. While the RBI didn't ex­plic­itly men­tion Iran, the Is­lamic Re­pub­lic is the only ma­jor crude oil ex­porter in­side the ACU. New Delhi is tread­ing a thin line: it is in­creas­ingly en­gag­ing with the U.S. to sat­isfy its am­bi­tion of play­ing a greater role in global af­fairs, but it can't af­ford to up­set Tehran be­cause it de­pends on them for oil and for sup­port on its dis­pute with Pak­istan over Kash­mir.

In­dia is a ma­jor oil im­porter, and brings in $11 bil­lion of crude oil an­nu­ally from Iran--about 14% of its to­tal crude im­port bill. The coun­try is In­dia's biggest crude oil sup­plier af­ter Saudi Ara­bia.

Also, Oil & Nat­u­ral Gas Corp Ltd. and other In­dian ma­jors are ex­plor­ing how to de­velop oil and gas re­sources jointly with com­pa­nies in Iran, the world's fifth-largest crude ex­porter. Ex­plain­ing its call Mon­day, the Re­serve Bank of In­dia said that the di­rec­tive to set­tle Iran trade pay­ments out­side the ACU ar­range­ment was de­ter­mined by "the dif­fi­cul­ties be­ing ex­pe­ri­enced by im­porters/ex­porters in pay­ments to/re­ceipts from Iran."

The Asian Clear­ing Union is an ar­range­ment where the par­tic­i­pants set­tle pay­ments for in­tra-re­gional trans­ac­tions among mem­ber cen­tral banks, help­ing econ­o­mize the use of for­eign ex­change and trans­fer costs.

In­dia, Pak­istan, Bangladesh, Nepal, Iran, Myan­mar, Bhutan, the Mal­dives and Sri Lanka are mem­bers of the union.

The U.S. and other coun­tries have been press­ing Iran to re­con­sid- er its nu­clear pro­gram, which they say are aimed at weapons pro­duc­tion. This has led to a string of in­ter­na­tional sanc­tions on Iran's econ­omy and to some for­eign com­pa­nies curb­ing trans­ac­tions with Iran.

Last week, the U.S. en­acted new fi­nan­cial sanc­tions against an elite Ira­nian mil­i­tary unit and the coun­try's largest ship­ping com­pany, as it in­ten­si­fied ef­forts to choke Tehran off from the global fi­nan­cial sys­tem.

In July, US Pres­i­dent Barack Obama signed sanc­tions which aim to pe­nal­ize com­pa­nies which in­vest in Iran's oil in­dus­try and those that ex­port re­fined petroleum prod­ucts to it. The Euro­pean Union later in July banned in­vest­ments in Iran's oil and gas in­dus­try, pro­hib­ited Ira­nian ship­ping com­pa­nies from op­er­at­ing within its ter­ri­tory and tar­geted trans­ac­tions with Ira­nian banks, among other moves. - PB News

RIYADH: Mo­hammed Bucheerei, Ith­maar chief ex­ec­u­tive and Adel A. El-Lab­ban, AUB Group CEO, with other of­fi­cial dur­ing the agree­ment sign­ing cer­e­mony. -Ap

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