Rupee account is first step. How India sells it to its friends in US,EU,Israel is the next challenge
In sorting out payments for oil imports from Iran,India has pulled off,so far successfully,a diplomatic and political feat of some finesse. While Indias annual oil import bill of $12.68 billion from Iran is 12 per cent of its total oil imports,the unilateral US and EU sanctions might have hindered Indias payment of the larger part of that bill about 80 per cent hitherto made in euros through a Turkish bank. As per the agreement reported in this newspaper on Thursday,India will now make 45 per cent of that in rupees,parked in UCO Bank,with no exposure to the US or Europe,and,therefore,outside the realm of the sanctions. Part of the rupee payments will also be deposited in two private Iranian banks,still escaping the sanctions imposed on state-owned Iranian banks.
This agreement is a clear indication from India that it means business vis-a-vis Iran. It also provides Delhi with leverage that few others pushed onto either side of the fence enjoy. India has excellent relations with the US,the EU and Israel. While New Delhi cannot influence any decision on military action against Iran from any quarter,it has no cause for friction with Tehran either. So the increase of Iranian imports of Indian commodities to reduce the trade disparity as well as project-exports,under the proposed oil for projects mechanism,are also on the cards. India has always respected sanctions against a state as long as those are UN-mandated,but is indeed under no obligation to honour unilateral sanctions.
Nevertheless,while this removes for now the likely difficulties of business,it doesnt solve the geopolitical problem of Iran for India. The heart of that is the growing confrontation between Iran and the West on the one hand and between Iran and Saudi Arabia on the other. The sanctions are only a reflection of this conflict by other means. With the India-EU meet coming up,walking this fine line is Indias test. As the confrontation deepens,Delhi will have to constantly calibrate its Tehran policy. That is both a challenge and an opportunity.