Trade official: India to pay Iran entirely in rupees
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The deal was signed between Iran and P5+1 in July 2015.
India eventually managed to get exemptions from the US sanctions on Iran’s oil exports.
This is while major efforts are underway by the two countries’ officials to facilitate financial transactions between the two countries. This comes as the two sides’ trade and private sectors have understood the situation very well, devised ways to continue trade cooperation with each other, and are optimistic about seeing better days.
In an exclusive interview with Iran Daily, Parham Rezaei, the deputy-president of Indo-Iran Chamber of Commerce and Industry expounded on the status quo of trade transactions between the two states and latest developments in this field following the reimposition of US sanctions.
IRAN DAILY: Could you please tell us the latest on current Iran-India trade ties and the volume of trade?
PARHAM REZAEI: The value of non-oil exports from Iran to India in the last year of the Iranian calendar (starting March 2017) stood at $1.7 billion. This is while exports reached $611 million during the first half of the current year. Iran’s import of non-oil goods from India reached $1.5 billion last year, with imports reaching $538 million for the first six months of this year. Iran’s annual oil exports to India, however, have been around $11 billion. These figures point to the positive balance of trade for Iran.
The two sides meet each other’s needs for a variety of goods. In other words, there is no competition in this regard. The main goods imported from India are rice, tea, and spices. A part of the imports are also industrial machinery, chemicals, and pharmaceuticals.
This year, however, we are witnessing a hiatus of exports to India which is due to our trade infrastructures undergoing changes. Our banking system is now more consistent with international principles. All these factors have led to some changes in the level of trade between the two sides.
The Foreign Exchange Integrated System, NIMA, was inaugurated. Prior to that, some of our traders used foreign exchange houses to do their business and register orders. These transactions were usually done without any foreign currency transferred. But now it is not this way.
The transfer of currencies must be done through the baking system and the currency needed must be procured through the Central Bank and NIMA. Our exporters must provide their currencies through the NIMA system.
The US wanted to cut Iran’s oil exports to zero when it imposed its second batch of sanctions on November 4 and exerted pressure on India to stop buying Iranian oil. Why didn’t this plan work?
Indian refineries are very dependent on Iranian oil. It is not possible for India to cut buying Iranian oil to zero because it has to revamp many of its refineries and this would take time.
So India obtained waivers so that in case the sanctions stay in place it can gradually decrease buying Iranian oil. But India has no problems buying Iranian oil for now.
How are Iran-India financial and oil transactions conducted?
Before the reimposition of sanctions we received the money in rupees and euros. However, it is very likely that from now on all our transactions will be in rupees. Talks are underway between the two sides in this regard. Our exports to India will not be hindered if all transactions are conducted in rupees. Currently, many countries are reaching agreements to use national currencies for their oil and non-oil trade with Iran.
What role does India’s UCO Bank play in facilitating transactions between the two countries during the period when Iran is under (US) sanctions?
Prior to the signing of the JCPOA, when Iran was under international sanctions, UCO Bank began playing a role in financial transactions between the two states by arranging for payments between them. When Iranian businessmen wanted to import goods from India, they would deposit a sum of money in an account at the Central Bank of Iran (CBI) as the payment for the imports and the same amount of money was paid to the exporter or seller in India in other currencies. The same trend is being followed at present.
In addition, in the next few months, Iran’s Bank Pasargad will obtain the permit for conducting activities in India and during the first six months of 2019 will open a branch in Mumbai to officially carry out a part of financial transactions between the two states. This will help resolve a portion of the problems currently besetting Iranian businessmen in India.
Nevertheless, Bank Pasargad will do its job in India in concord with the policies developed by the South Asian country. Although the Iranian bank will not be able to operate in accord with the CBI’s policies, it will definitely manage to be of great contribution to the financial transactions between the two countries, particularly those pertaining to Iranian exporters of techno-engineering services who need banking guarantees to do business outside Iran.
To what extent will Iran’s membership in the Financial Action Task Force (FATF) on money laundering help facilitate trade between the two countries?
Since a few years ago, most of the general outlines of the parliamentary bills on Iran’s membership in the FATF have been approved. Although there are differences over one or two paragraphs, it is highly unlikely that the bills on Iran joining the intergovernmental organization would be rejected.
Nevertheless, to be able to enter the global markets, we have to promote transparency in our transactions. We will definitely require FATF’s membership to be able to have trade ties with other countries.
Are Indians interested in investing in Iranian projects? What measures have been taken to this end?
Within a few weeks, the Indian operator appointed for the development project of Shahid Beheshti Port in Chabahar, in southeastern Iran, will begin its operations. The development of the port has been handed over to the Indian operator under a 10-year BOT (build–operate–transfer) contract. The Indian operator has not thus far initiated the project due to a number of problems pertaining to banking permits and administrative procedures. However, now that these problems have been solved, it will officially begin its activities in the port within a few weeks.
To this end, nine ships carrying wheat shipments from India to Afghanistan moored at Chabahar Port and unloaded the cargos.
The cargoes were, thence, sent to Afghanistan via road; thus the project has been initiated and, moreover, has produced favorable results.
In the year to March 2017, an agreement was signed among Iran, India and Afghanistan which was approved by the Iranian Parliament a year later. As per this agreement, a joint committee will be set up by the three countries during the next few months to expand trilateral transactions.
Chabahar Free Zone can be a very good trade hub for Afghanistan in terms of shipping.
I maintain that very good trade transactions can be conducted through Chabahar. The port has a bright future. At present, a large number of Indians are expressing interest in investing in Chabahar’s development projects as the port is a free zone and they can either have 100 percent ownership, or joint ownership with Iran, in producing various goods there.
Chabahar is a special strategic zone which provides the opportunity to sell goods produced there, both to mainland Iran, or through the country to Europe and the Commonwealth of Independent States while bearing very low costs.