EghtesadOnline: Trade between Iran and India stood at about $17 billion in 2018, witnessing an increase of 24% compared to 2017, according to Iran's Ambassador to India Ali Chegini.
The United States pulled out of the nuclear deal it signed with Iran together with China, the UK, Russia, France and Germany last year and reimposed sanctions on Tehran. The new round of sanctions dubbed by Washington as "toughest ever" are aimed at restricting Iran's international trade.
Iran’s exports to India stood at $13.36 billion, accounting for 2.6% of India's total imports during the year under review.
India's exports to Iran stood at $3.3 billion, accounting for 1% of India's total exports, according to Financial Tribune.
According to the ambassador, Iran was India’s 15th biggest trading partner in 2018.
7% Decline in Non-Oil Trade
Data released by the Islamic Republic of Iran Customs Administration show Iran traded 10.37 million tons of non-oil commodities worth $4.63 billion with India during the last Iranian year (ended March 20, 2018), registering a 10.78% and 7.14% decline in tonnage and value respectively compared with the year before,.
India was Iran's fifth biggest trading partner during the period.
Iran’s exports to India stood at 8.36 million tons worth $2.04 billion to register a 14.95% and 25.34% decrease in tonnage and value respectively year-on-year.
India was Iran’s seventh export destination in the world.
Iran exported methanol, urea, ammonia and bitumen to India during the 12-month period.
India exported 2.01 million tons of commodities worth $2.59 billion to Iran, up by 12.04% and 14.91% in tonnage and value respectively YOY. It was the fourth exporter of goods to Iran during the month under review.
Iran mainly imported semi- and wholly-milled rice, tea, graphite electrodes used in furnaces and oilcake from India.
Indian Concerns Growing Over Oil Imports
Despite the increase in trade last year, bilateral exchanges between Iran and India could be on decline in 2019.
Indian exports to Iran are likely to take a big hit over the next few months and may even halt if the new government in New Delhi decides not to resume oil imports from the Islamic Republic in adherence with the US economic sanctions, say Indian exporters.
“Assuming there is no breakthrough in the situation and the government sticks to the decision of not buying oil from Iran, whatever money is lying in the UCO Bank at the moment will get used up. We will not be able to sustain exports beyond four months. Virtually all exports to Iran will stop,” Ajay Sahai, director general of the Federation of Indian Export Organizations was quoted as saying by Indian newspaper Hindu Business Line in May.
Kolkata-based UCO is the only Indian bank that has business relations with Iran.
UCO was first designated by India’s government as the payment bank for Iranian oil in 2012, as the US tightened an earlier round of sanctions. The bank was chosen because of its limited international presence, which made it less vulnerable to repercussions from its involvement in the oil trade, processed in euros and rupees to avoid exposure to the US banking system.
Those sanctions were lifted in 2015, leading to a drop in the bank’s profits as other Indian banks entered the business. But the lender resumed its former privileged role as US President Donald Trump pulled out of the 2015 nuclear deal last year and started reimposing penalties.
As per the mechanism, India deposits payments in rupee in Iran’s account for the oil purchased and then uses it to make payments to Indian exporters of goods to Iran.
“Right now exports are taking place to Iran and it will happen till the day there is money in the special rupee payment account of the UCO Bank for transactions with Iran. However, if oil imports don’t restart and the money dries up, from where will the government have funds to pay exporters to Iran?” Rajesh Paharia, an exporter of rice to Iran, noted.
India stopped buying oil from Iran from May 2 after the US sanction waiver for buying Iranian oil expired and the Trump regime refused to extend it. When Iranian Foreign Minister Mohammad Javad Zarif was in New Delhi last week to discuss India’s plans on oil purchase, he was informed by his Indian counterpart Sushma Swaraj that he must wait till after the general elections for a decision on the matter.
“As per rough estimates, there would be around Rs12,000-15,000 crore ($1.72-2.15 billion) in the rupee account. Even when we add some more to it for the payments that have to be made by the Indian government for the oil purchases made in the last two months, the money will not last for long,” said Paharia.