|Europe court order on Iran bank to make Indian imports easier||
European Court of Justice order last fortnight, ending EU sanctions on the largest Iranian financial entity, Bank Mellat, may open new avenues for countries like India to make payments to Iran for crude and non-crude imports.
The Luxembourg-based court’s order assumes significance as it ends three-years EU sanctions against Bank Mellat and allows private trade with Iran by individuals and companies from countries like India.
The court ruled, “there was no evidence to justify the European Council’s decision to list Bank Mellat under its Iran sanctions list’. European Council had in 2010 included Bank Mellat in the list of sanctioned list of entities presumed to be involved with Iran’s nuclear program.”
With Bank Mallet getting out of the sanctions list, both oil and non-oil trade between private and government agencies may get easier. India imports crude worth $ 10.5 billion annually and it has been extremely difficult to make payments to Iran.
Iran had agreed to 40 percent crude payment in Indian rupees through its account in UCO bank. Owing to recent noose tightening by Obama administration, U.S. dollar payments may continue to be an issue, but trade with Iran and other currencies including Chinese yuan or euro is likely to loosen up.
European Court of Justice order of January 29 may make this possible. Already, Ukraine is toying with the idea of resuming trade with Iran via the euro or even the yuan.
Obama administration’s new sanctions force countries like India that buy Iranian crude to only use banks within their own borders to make payments.
Those banks also can’t send that money to Iran or elsewhere overseas, effectively forcing Tehran to buy local products with the proceeds of its crude sales. What’s more, the U.S. restricts the kind of goods that Iran can buy with that money especially the precious metals having dual use including the nuclear program.
London based law firm Zaiwalla, Sarosh Zaiwalla represented Bank Mellat in the European Court of Justice. Its senior partner Sarosh Zaiwalla told Financial Chronicle from London, “The European court order has significant implications for private trade and financial transactions with Iran.”
For instance, Iranian banks like Bank Mellat opens a branch say in Mumbai or New Delhi, the payments may be routed through it, he maintained. Zaiwalla conceded that U.S. dollar payments may continue to be blocked by New York financial authorities.
Zaiwalla, who heads the first Indian law firm based out of London, said, the court “concluded that fairness and the rule of law are more important than temporary political objectives and Bank Mellat should never have suffered simply because it happens to be based in a country of whose government the EU disapproves.”
“Clear message from the court is that European Institutions do not have the unfettered discretion to impose sanctions on whomsoever they like. This win (Bank Mellat) reminds the institutions that they too are subject to the rule of law, which provides that the imposition of sanctions upon an individual or entity requires evidence” Zaiwalla said.
India imported $10.5 billion worth goods mostly crude purchases from Iran in last financial year, while it exported around $ 1.5 billion worth foodstuff, pharmaceuticals and health care products.
Rafiq Ahmed, president of Indian Federation of Exporters Organisation (Fieo) is, however, sceptical about the impact of the European Court of Justice order. “Sanctions have in any case had very limited impact on Indo-Iranian trade through payments continue to pose problems”.
Ahmed said, “Some payments were being routed through a bank in Turkey. But, one has to wait and see how things will shape up after the latest round of sanctions by U.S. and the European Court of Justice order”. “U.S. and EU may not bend because of the court orders” pointed out Fieo chief.
He pointed out that Indian companies had routed payments to Iran via banks in Germany. After the EU sanctions, Iranian-Germany trade have also impacted in a big way.
Iran had planned to barter large quantities of Indian wheat in exchange for its crude oil. But, the deal floundered reportedly due to quality issues with Indian wheat. This forced Tehran to back out of a plan to purchase around 3 million tonnes wheat from India.
From Indian point of view, New Delhi had moved to Saudi Arabia or even Iraq to source its massive crude requirements though it does not recognises sanctions imposed by either EU or U.S..
India has been quietly looking towards alternative sources of crude to meet its massive industrial requirements, while indications are that at least 15 percent cut may be imposed on its sourcing from Iran.
MRPL, the largest Indian purchaser of Iranian oil has also moved to buy more crude countries like Azerbaijan, Kuwait etc.
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