EghtesadOnline: An Indian bank has received the authorization of the Reserve Bank of India–the country’ central banking institution–to invest in Iran in rupees as part of the initiative by the Asian superpower to strengthen economic ties with Iran.
According to India’s Deputy Chief of Mission in Tehran Devesh Uttam, six Iranian banks have also received the permission to invest in India with Indian companies enjoying the freedom to invest in Iran in rupees.
“Indian attaches lots of importance to relations with Iran and there is great potential for bilateral economic relations between the two countries,” Uttam was quoted as saying by Fars News Agency.
India announced in February that for the first time beyond Bhutan and Nepal, it would in invest in a foreign country—Iran—through its own national currency rupee to bypass any trouble arising out of impending US primary sanctions against Iran, which bars the country from dealing in dollars, according to Financial Tribune.
The announcement was made as President Hassan Rouhani traveled to India on a three-day visit in mid February, his first since he took office in 2013. The two countries signed 15 agreements, including one on avoidance of double taxation.
A major deal also signed between the two sides was a lease agreement for the Shahid Beheshti Port at Chabahar. It was signed between Iran’s Port and Maritime Organization and India Ports Global Limited.
Chabahar Port lies 90 km from the China-sponsored Gwadar Port in Pakistan. The Chabahar project in southeastern Iran is significant, as it serves as a transit route linking India, Iran and Afghanistan bypassing Pakistan.
The agreement means Iran is leasing a part of the area of the multipurpose and container terminal for 18 months for the Indian side to take over operations of port facilities in the first phase of the port development project.
Uttam said on Thursday that his country is pursuing the development of Chabahar Port, which is very important for the two countries in terms of trade since it establishes a link between Afghanistan and Central Asia.
The official added that in order to exploit the full potential of Chabahar Port, India is also developing Chabahar-Zahedan Railroad.
India has agreed to build a 500-km railroad from Chabahar to Zahedan, the provincial capital of Sistan-Baluchestan, close to the Afghan border. India’s state-owned IRCON has agreed to build a rail route at a cost of $1.6 billion as part of the transit corridor to Afghanistan.
After connecting Chabahar to Zahedan, the railroad will be linked to Zaranj in Afghanistan. Hence, when the Afghan cargo arrives in Zahedan, it can be transported by a 1,380-km railroad to Chabahar and then shipped to India.
Uttam also confirmed news that the Iranian private bank Pasargad is to open a branch in India soon. He said several Iranian banks had requested to open branches in India and Pasargard has received the green light.
In late February, Pasargad announced on its website that it was soon opening a branch in India. According to the bank’s statement, the Indian license for the bank was issued during President Rouhani’s recent visit to Delhi.
The official added that in line with ditching the US dollar in bilateral trade, a joint committee has been formed by the two countries to review conducting trade and investment in rupee and rial.
In response to restrictions on using the US financial system, Iran has responded with a slew of measures, including clinching agreements with several nations to use national currencies in bilateral trade.
According to Central Bank of Iran’s head of Exports Department, Samad Karimi, Iran currently has a total of 10 “memoranda of understanding and protocols” pertaining to monetary agreements with other countries.
Based on US primary sanctions, banks the world over can engage in US dollar-denominated transactions involving Iran or Iranian parties as long as those transactions do not pass through the United States or otherwise involve a US citizen.