How are sanctions on Iran affecting trade with India?

Afresh plethora of national and international sanctions have followed amendments introduced in February 2013 by the US Treasury Department to the Iran Threat Reduction and Syria Human Rights Act of 2012 to induce Iran to abandon its nuclear programme and conform with international obligations by enhancing Iran’s economic isolation.

In an additional blow to Iran, the new sanctions also seek to force countries purchasing Iranian crude oil to facilitate payment only via banks operating within their territories.

Indian scenario

From January 2009, countries in the Asian Clearing Union (ACU) – India, Pakistan, Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka, Myanmar and Iran – had the option to settle their transactions in either the ACU dollar or ACU euro. Authorized dealer banks in India were permitted to open and maintain ACU dollar and ACU euro accounts with their correspondent banks in other participating countries and all eligible payments had to be settled by the banks through these accounts.

Mithuni Mehta and Amrita Mehta are senior solicitor associates at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai.