India and Iran have worked out a payment mechanism for Iranian crude. The issue was crucial for both the sides as Iranian oil constitutes 12% of India consumption. Without that oil India could well have found itself in serious difficulties regarding its energy security.
The US had last year not only imposed sanctions of Iranian oil, but also on the Iranian central bank, though which the countryâ€™s oil revenues are routed. The US sanctions extended to entities which did business with Iranâ€™s central bank, locking such entities out of the American financial system.
India had said that the US sanctions will not affect it, and that it was not going to seek a waiver. The Indian government had in the past relied upon a German, and then a Turkish bank, to route its money to Iran. Those routes were shut after fresh US sanctions of last year.
According to the treaty worked out between Iran and India, India will pay 45% of the payment in Indian currency, while for the rest India might increase its exports to Iran. When asked if the matter of paying in gold came up, Mehdi Nabizadeh, Iranian ambassador to India, said that â€œgold was not suitableâ€
For Iran this is a crucial breakthrough, as EU has joined US in embargoing Iranian crude in attempts to force the country to halt its domestic enrichment program. The EU and US have been proactively isolating the middle eastern country which has emerged as an alternative power centre to Israel, and has an Islamist government. In the last year, the US went on the offensive with accusations of Iran plotting to kill the Saudi ambassador; accusations that drew widespread media skepticism and condemnation. Later the same year, the IAEA, came out with a report in which it expressed its â€œconcernâ€ and asked for â€œclarificationâ€ over the alleged indications of Â development of technology that might also be relevant in the making of a nuclear warhead. Even though the report was clear that there had been no violations of any of IAEAâ€™s rules or safeguard mechanisms.
The report became the basis of not just a full-fledged media campaign which alleged that in fact Iran was not only building a nuclear bomb but that it may do so within a year, despite there being nothing in the IAEA report to warrant that conclusion. The media also raised fears that a middle eastern war was imminent as Israel was a hair breadth away from attacking Iranâ€™s nuclear facilities. All of this served merely as an occasion to raise sanctions to levels where Iran itself would find it necessary to take rash steps or precipitate a crisis to ensure it does not sink in slow economic decline.