Iran Sanctions - Foreign Press Centers

Iran Sanctions
countries have been concerned that the U.S. sanctions against dealings with Iran’s Central Bank
would result in a sudden end to their ability to pay for Iranian oil and that this would lead to a
spike in world oil prices or a cutoff of their supplies. As a result of negotiations with the United
States, Japan has reduced its imports of Iranian oil by about 20% (70,000 bpd), and was granted
an exemption under P.L. 112-81 on March 20, 2012. Japan hopes the exemption will benefit its
banks, such as Mitsubishi UFJ Financial Group, Mizuho, and Sumitomo Mitsui, that process
transactions with Iran’s Central Bank. 42 South Korea is reportedly still negotiating with U.S.
officials the size and rate of its reductions in oil buys from Iran, and observers expect it will likely
approximate those of Japan and earn a similar exemption under P.L. 112-81.
India
India’s record of cooperation with multilateral sanctions against Iran is mixed. India has generally
been considered friendly toward Iran, and many experts were surprised when India’s central bank,
in late December 2010, announced that it would no longer use a regional body, the Asian Clearing
Union, to handle transactions with Iran. The Asian Clearing Union, based in Tehran, was set up in
the 1970s by the United Nations to ease commerce among Asian nations. There have been
allegations in recent years that Iran might be using the Clearing Union to handle transactions so
as to avoid limitations imposed by European and other banks, and India’s move followed
President Obama’s visit there in November 2010. With India’s purchases of about 310,000 barrels
per day of Iranian oil (about $11 billion worth of oil in 2011) made difficult by the move, in
February 2011, India and Iran agreed to use an Iranian bank, Europaisch-Iranische Handelsbank
(EIH) to clear the payments. On May 23, 2011, the EU named EIH and about 100 other entities as
Iran proliferation-related activities, rendering India and Iran again in search of an alternative
payments mechanism. With approximately $6.3 billion in oil payments due Iran building up in an
escrow account, in July 2011 Iran threatened to reduce or cut off entirely oil shipments to India.
In late July 2011, the two identified Turkey’s Halkbank as an acceptable processor, and, on
September 4, 2011, Iran’s Central Bank Governor said India had fully settled its debt. The U.S.
law sanctioning dealings with Iran’s Central Bank led Halkbank in January 2012 to express the
view that it might not be able to continue handling payments to Iran.
With the payments mechanisms largely closed or closing, India’s position on whether it will
cooperate with a broader oil embargo on Iran remains in doubt as of late March 2012. India has
used the payments difficulties to force concessions from Iran, including an Iranian acceptance of
payment for about 45% of the oil sales in rupees, India’s local currency but which is not
convertible. The remainder might be settled through barter trade or Indian investment in Iran, and
some might be settled in gold. The Iranian concessions have made it attractive for India to refuse
U.S. efforts to persuade it to cut its oil purchases from the baseline level of about 350,000 barrels
per day. In addition, India sent a large trade delegation to Iran (March 10-14, 2012) to discuss
new trade opportunities in goods not subject to international sanctions, reportedly agreeing to
some additional trade in commodities such as sugar. Some Members of Congress wrote to India’s
Ambassador in Washington, DC, on March 1, 2012, urging India to join U.S. and EU-led efforts
to curb Iran’s oil exports.
42 “Japan May Cut Iran Oil Imports by Over 20 Percent” Reuters, February 23, 2012.
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