Prime Minister is sending Speaker of Lok Sabha Meira Kumar to Teheran later this year as a part of this reconciliation process and Dr. Singh is expected to visit Teheran sometime early next year. Finance Minister Pranab Mukherjee is also in touch with the Iranian ministers and he has assured them of a big step up in trade and investment relations between the two countries, especially in the oil sector.

India and Iran have worked out a payments solution to the bilateral trade that had almost stalled because of the US sanctions on Iran. The payments for crude oil imports to Iran faced severe problems with effect from December 2010 due to the pressure put by the US authorities on the banks of different countries which agreed to route the Indian payments to Teheran.

Now, the Indian side has worked out a lasting solution, withstanding the pressure of the US authorities. India will pay for at least half of the oil and non oil imports from Iran by depositing the equivalent rupees in accounts opened with Indian banks and the balance trade will be settled through dollar payments routed through other foreign banks. This will provide relief to Indian exporters who have not received payments for an estimated Rs. 1800 crore of goods shipped since December 2010. Iran will, according to this understanding, use the rupee funds to pay for goods it imports from India, to fund already committed investments in petrochemicals sector and to buy Indian government bonds.

It has been agreed that Reserve Bank of India will place 2.5 billion that India owes Iran under previous Asian Clearing Union payment regime as initial corpus in the rupee accounts of the Iranian Central Bank BMJI. This Iranian bank will be allowed to open rupee accounts with the IDBI Bank and UCO Bank. BMJI has already submitted forms for opening the accounts.

India is not taking it easy after this agreement. The Government is exploring other options including talks with the banks in Russia and South Korea, both countries that have trade relations with Iran. India has so far managed to clear payments worth 4 billion dollars through Turkey’s Halkbank. India is looking for a permanent solution to the payments issue with Iran. RBI and BMJI are now identifying designated banks in Iran and India to open letters of credit that would include exchange rate and other payments conditions.

It has also been agreed that both sides will identify additional banks for routing payments so that even when one bank’s operations are affected due to US pressure, payments can be made through the others. India will be very happy to have some arrangement made to route the payments to Iran through the Russian banks which are already engaged in routing trade payments of their own country to Iran.

Meanwhile, India is actively interested in vigorously pursuing the Silk Road project which will link Central Asia with South Asia through a network of roads, railways and pipelines and will trigger massive development of Afghanistan and the adjoining countries. The US foreign secretary Hillary Clinton is the active promoter of this project which has the potential of generating multi billion dollar investments and construction work and she is actively supported by the leading US companies and the European giants who have stakes in such massive transportation work. Afghanistan and Pakistan are also equally interested.

Indian external affairs minister S.M. Krishna is coordinating the Indian position by associating with the other central ministries and the official view is that the Indian companies will be benefited in a big way once this project takes off. India has big investments in Afghanistan and the project will enable the leading Indian construction companies to get more work under the project.

As India sees it, this Silk Road project would develop the building of Afghanistan as a hub linking Central and South Asia through pipelines, trade and transit routes for bringing prosperity in the region as a whole. The next meeting of this Silk Road group will be in Istanbul in the first week of November and this meeting will be followed up by another meeting in Bonn in the first week of December this year. The idea is to concretize the process of collaboration and working on the detailed plans.

Indian sources say that the highways and new Silk Road projects will be of big interest to Europe as a level of direct access to Central Asia. Americans are already involved in the Central and South Asian region and the US companies are engaged in Afghanistan. The Silk Road project is expected to offer European companies also big opportunities. New Delhi has already signed on to an US$ 7.6 billion project to build a 2,000 km pipeline that will bring some 70 billion cubic metres of gas each year from Turkmenistan’s Daultabad fields to India via Afghanistan and Pakistan. The construction of the pipeline will give both India and Pakistan reliable access to world’s fourth largest gas reserves.

As regards China, China has already made substantial investments in Central Asia. In December 2010, a 1833 km pipeline carrying gas from the Saman-Depe gasfileds of eastern Turkmenistan to China’s Xinjiang region went online. China has made substantial investments in energy infrastructure in Kazakhstan and Turkmenistan

India is willing to have active Russian involvement in this Silk Road project in view of Russian interests in the oil reserves in the Central Asian region. Further the active involvement of Russian companies will be a balancing factor as against the domineering stance of the US and the Chinese companies. (IPA Service)