Not worth banking on

India-Iran Bank Sanctions

Indian companies and financial institutions are poised to assist Iran in sidestepping international sanctions by using the German financial system to facilitate the transfer from India to Iran of billions of dollars annually for oil sales. The Indian government should take immediate action to prevent this abuse of the financial sector. Failure to take a strong stance will allow a rogue regime to fill its coffers with the hard currency it needs to repress its people and facilitate terrorism.

On March 29, Germany’s foreign and economic ministries ratified an arrangement that would allow India to transfer an estimated $12.65 billion to the German Central Bank to pay for Iranian oil. The money would then be routed to Iran through the European-Iranian Bank (Europisch-Iranische Handelsbank, or EIH), which has been blacklisted for proliferating weapons of mass destruction. According to the Indian media, New Delhi and Tehran have been trying to find a way to conduct business as sanctions levied by the United States, Europe and the United Nations have made it difficult for Iran to move its funds internationally.

Until recently, India and Iran were using a relatively unknown clearing house based in Tehran to move billions of dollars annually. Since 2008, India and Iran have transacted business involving some $30 billion using the Asian Clearing Union. In late 2010, the US government realised that Iran was easily circumventing sanctions using this mechanism. Washington put pressure on New Delhi, and transactions between Iran and India ground to a halt.

The traditional Indian-Iranian relationship has revolved around bilateral trade. In 2010, the two countries conducted $14 billion of business, mostly in the oil and gas sector. It is natural for India, which wants to fuel its economy, to be a voracious consumer of energy. But there are many other sources around the globe; New Delhi’s insistence on buying oil from a rogue regime is nothing short of baffling.

There are other reasons why India should seriously reconsider its relationship with Iran. The Islamic Republic of Iran endorses a radical form of religion that is at odds with the tenets upon which India rests. Iran was founded upon the values of militant Islam and a strict interpretation of the sharia. Iran financially supports terrorist organisations around the globe that engage in crimes against humanity. The ideology that drives Iran and its proxies is not dissimilar from the one held by those who carry out heinous terror attacks in Kashmir, Mumbai and other places throughout India.

In addition, Iran’s human rights record is unspeakable. The regime is criticised by Iranian citizens, international organisations, activists, non governmental organisations and the UN. The government regularly engages in torture, rape and killing of civilians, dissidents and political prisoners. According to Human Rights Watch, under President Mahmoud Ahmadinejad, Iran’s human rights record has “deteriorated markedly”. Is this the type of regime with which New Delhi wishes to align? The ideals promoted by great leaders such as Mahatma Gandhi could not be further from those of rulers like Ahmadinejad.

India has publicly supported Iran’s right to peaceful nuclear technology but Iran must, according to former external affairs minister Pranab Mukherjee, “satisfy the international community that its programme is indeed peaceful”. To their credit, Indian officials have not completely bought Iran’s story, and they publicly support the international sanctions regime. But the government feels it is in India’s interest to facilitate and expand business relations, with the result that India has been willing to allow its financial system to be abused to help Iran.

Indian officials and business leaders should be aware that when they make payments for oil via banks such as EIH, they are, in fact, supporting organisations that are part and parcel of Iran’s weapons programme. In September 2010, the US Treasury Department blacklisted EIH because it serves “as a key financial lifeline” for Iran. The bank is reportedly involved in arms trafficking as well as the Iranian missile and nuclear programs. It is also worth noting that two of EIH’s main shareholders, Bank Mellat and Bank Refah, are subject to European Union and US sanctions and Mellat is additionally subject to UN restrictions for its role in Iran’s nuclear regime.

Indian companies using the German Central Bank/EIH mechanism to transact business with Iran should realise that they risk losing their access to US and European markets. We can only hope that many of these companies will decide to change course. The government and people of India should take a strong stand against Iran as long as it continues to march towards obtaining a nuclear bomb, oppressing its people and proliferating terrorism. Not to do so is a betrayal of the values and ideals that free nations everywhere hold dear.