Shubhda Chaudhary asked: What are the implications of accepting the US-sponsored sanctions against Iran by India?

S. Samuel C. Rajiv replies: It is not mandatory on the part of India to follow the US-sponsored sanctions against Iran given that these are unilateral measures primarily applicable to the US companies or companies that do/intend to do business with the US-based companies. These sanctions have certain requirements – like prohibiting an investment exceeding $20 million in a year in Iran’s petro-chemical industry, restrictions on loans that can be provided by the US financial institutions ($10 million over a 12-month period), among others. The above are part of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of January 2010. The Obama administration further tightened such measures by targeting Iran’s Central Bank in December 2011, making it difficult for others to carry out business transactions with Tehran.

India has been negatively affected by these unilateral measures, and has had to find alternative mechanisms to pay for Iranian crude. The percentage of Iranian oil though has been declining relative to the overall imports. Finance Minister Pranab Mukherjee during his recent visit to the US remarked that India was buying 14 million tonnes of Iranian oil, as against total imports of 170 million tonnes (for a little over 8 per cent).

The US 2012 National Defence Authorisation Act urges countries to cut their imports from Iran ‘significantly’. President Obama recently gave 11 nations (10 European and Japan) exemption from US sanctions which could be effective from July 2012 after making the consideration that they have reduced their imports ‘significantly’. While India has not applied for such exemption, it could still meet the criterion by not paying in ‘hard currency’ for the crude it buys, sourcing its requirements from others like Saudi Arabia (which is to supply 32 million tonnes in 2012-13, which is 5 million tonnes more than the previous year) among other pertinent steps.