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A trade dispute made complicated

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On October 25, 2010 The EU required that euro-currency settlements with Iran be cleared per transaction. In compliance with this, the Reserve Bank of India (RBI) ruled on December 29 that dollar and euro payments to Iran could not be handled through the Asian Clearing Union (ACU) which was used for transactions between central banks, since the ultimate receiver of the payment could not be ascertained. The ruling seemed to have come without prior consulation with oil companies which import about 14% of India’s crude usage from Iran. A report in ET summarized the crisis.

Following this, BS reported:

The United States on Wednesday praised the Reserve Bank of India (RBI) for reducing its dealings with Iran’s central bank, saying the Islamic Republic misuses its financial relationships to support its nuclear programme.

“We think the Reserve Bank of India has made the right decision to carefully scrutinize and reduce its financial dealings with the Central Bank of Iran,” White House spokesman Tommy Vietor said in an email.

India denies US pressure, but Indian newspapers are not convinced. Trade negotiations started immediately, as the Hindu reported:

The public sector oil companies in India, the major importers of crude oil, have expressed concern at the RBI’s decision not to allow the Tehran-headquartered Asian Clearing Unit (ACU) to be used for making payments to Iran.

Petroleum Ministry officials said one of the options that emerged at a recent meeting in the Finance Ministry was that the Central Bank of the Islamic Republic of Iran would open an account with the RBI in India for the companies to make direct payments.

The other was that India could write to the European Union (EU), seeking exemption from the certification process required for imports from Iran. It is felt that at a later date, the ACU could recognise a currency other than the dollar and the Euro. An Indian delegation would soon visit Tehran to work out the modalities for payment.

The RBI said that the meeting between the two sides was a technical one to discuss modalities for future trade transactions, including in oil. Till October 2010, the transactions between the two countries were carried out in Euro through the ACU, which was set up in 1974. The clearinghouse settles trade transactions with Bangladesh, Bhutan, India, Iran, Nepal, Pakistan, the Maldives, Myanmar and Sri Lanka.

Iran made a bland statement, as Reuters reported:

Iran said an oil trade dispute with India had been settled by changing the currency for payments, deputy oil minister Ahmad Khaledi was quoted as saying by the semi-official Fars news agency on Friday.

“By changing the currency for oil transaction between Iran and India the problem was solved,” said Khaledi.

Indian

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Written by Arhopala Bazaloides

January 2, 2011 at 5:09 am

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