How much help are we getting from India on Iranian sanctions?
Last week, I praised the Obama administration for bolstering our relationship with India, noting that we had secured India's co-operation in "tighten[ing] the web of sanctions around Iran."
But it's not clear if that enthusiasm was premature. The Wall Street Journal reported yesterday:
Days after India's government clamped down on the main conduit Indian companies use to pay for Iranian oil, New Delhi and Tehran have opened a temporary channel for transactions, a senior Indian official said Tuesday--one that involves routing payments through an Iranian bank that is already under U.S. sanctions.
The move essentially moves India from one uncomfortable spot into another, and could place Indian firms at loggerheads with the U.S. legal system. Under U.S. legislation enacted in July, any foreign firm dealing with Iranian entities sanctioned by Washington could also find itself banned from conducting business inside the U.S.
The Journal reported that the U.S. government has raised its concerns with India about the "Clearing Union, a trade-finance clearinghouse through which Iran does most of its business with India."
The revelation that the government of India "advised oil companies to open individual accounts with government-owned State Bank of India--India's largest lender--which has a branch in Frankfurt," rather than directly with the blacklisted Iranian Trade Bank points to the shortcomings of sanctions.
A subsequent story in the Journal today assures us that "State Bank of India will take suitable precautions to avoid possible U.S. sanctions due to any dealings with the blacklisted Hamburg-based European-Iranian Trade Bank AG, a senior Indian finance ministry official said Wednesday." Nevertheless, "The official didn't say what precautions SBI would take to avoid any potential U.S. action."
The episode illustrates the difficulty of interrupting economic transactions between Iran and other nations. Given the plethora of international arrangements, as well as the subterfuge practiced by both Iran and Western banks, the sanctions are hardly an immediate or perfect mechanism for isolating the Iranian regime.
None of this should suggest that an enhanced relationship with India isn't in our interest. It plainly is. India responded quickly to the reported efforts to evade sanctions. Moreover, apart from Iran, the opportunity to broaden our relationship with India still exits.
The real lesson of this episode is that we should be circumspect about India's -- or any country's -- ability and willingness to turn off the flow of cash to the revolutionary Islamic regime.
| January 6, 2011; 12:00 PM ET
Categories: Iran, foreign policy
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