US sanctions on Iran may impact Indian exports

  • 10-Aug-2018
  • US sanctions on Iran may impact Indian exports

With the new US sanctions against Iran set to that came into effect from 7th August, the fate of India’s rice and tea exports may now depend on the possible exemption of food and medicines from the sanctions and the agreement on oil imports reached between New Delhi and Tehran.

“We are keen to study the details of the US sanctions against Iran. If food and medicines are exempt, it would be good news for exporters of rice and maybe of tea as well. But, exports also depend on India’s continued oil imports from Iran in the absence of which it might be difficult to work out a suitable payment mechanism,” a Government official said recently.

As the fresh US sanctions are to be largely targeted towards graphite, raw or semi-finished metals (aluminium, steel, coal), or software for integrating industrial processes, New Delhi is hopeful that food and medicines supply would be exempted.

Restrictions are also expected on purchase or acquisition of US dollar banknotes by Iran and the trade in gold or precious metals.

“If rice and tea are exempted from sanctions, a part of the problem of Indian exporters is solved. But much would depend on the payment mechanism worked out between India and Iran for these exports as there would be sanctions against dollar payment,” the official said.

“Iran’s interest in continued imports of rice and tea from India and working out a suitable payment mechanism could be tied to India’s decision to continue a substantial part of its oil import from the Islamic Country after November 4, when US sanctions on oil are operationalised,” the official added. Continued oil imports might also lead to Iran increasing its imports from India to reduce the existing trade gap so that the “barter-like’’ rupee-rial mechanism works to its full potential, he added. India’s imports from Iran in 2017-18, dominated by petroleum, were valued at $11.11 billion while exports were worth just $2.65 billion and comprised mainly of rice and tea.

The situation for exporters to Iran, at present, is uncertain, agrees Ajay Sahai from the Federation of Indian Export Organisation.

However Vijay Setia from the All Indian Rice Exporters’ Association is hopeful that rice exports will not be affected as it was an essential commodity and was sure to be exempted from sanctions.


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