India’s Prime Minister Manmohan Singh 370.
(photo credit: S. SAMUEL C. RAJIV)
NEW DELHI - A large trade delegation from sanctions-hit Iran, in India largely to buy farm commodities, has reached only a few small deals for animal feed due to problems using a new mechanism meant to allow payment of suppliers using the Indian rupee.
The 56-member team, led by the president of Iran's chamber of commerce, reached New Delhi on Sunday at around the time US Secretary of State Hillary Clinton also arrived in India to persuade it to reduce oil imports from the Islamic republic.
India is the second biggest customer for Iranian crude oil, paying around $11 billion a year, and will remain a major buyer even if US efforts to substantially reduce the trade succeed.
India hopes to boost its own exports to Iran to cut the trade imbalance between the two but a major obstacle is that US pressure has led to the closure of the previous payment mechanism.
One of the Iranian traders, from Tehran, said the new arrangement, using the rupee, was still not working correctly.
"While using the rupee mechanism, we are facing some teething troubles and hope to enter into large contracts only after the new mechanism becomes fully-functional and hassle free," the trader said.
Traders said their group had made inquiries to buy commodities such as wheat, sugar and soymeal but had sealed deals to import only small quantities of animal feeds.
Until now, the rupee mechanism had just been used to clear a backlog of export debts and payments totaling 3.8 billion Indian rupees ($71.10 million).
The FIEO, a quasi-government body set up by the trade ministry, led a delegation to Iran in March when the new rupee payment mechanism was put in place after the closure of the previous conduit. The rupee mechanism uses an account in India's UCO Bank for payments to exporters.
The United States is using sanctions to try to dissuade Tehran from pursuing a nuclear program that the West believes is aimed at producing arms. Iran says the work is for peaceful purposes.