US Sanctions Impacting India

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US Sanctions Impacting India Economy: 

US Sanctions

US sanctions on Iran don’t just affect the country itself. In India, the sanctions are affecting the tea trade, as well as traders of basmati rice. The problem is that things are being delayed due to products having to be shipped through different countries. In the tea trade specifically, the worry is that there will be difficulty exporting tea to Iran because it will need to go through the United Arab Emirates or other countries in the Middle East. This will make exporting more expensive, which is bad for the industry as a whole.

Iran imports 29 million kilos of Indian orthodox teas. However, the chairman of India Tea Association, Azam Monem, says that they are hoping to import this entire volume before the US sanctions come into place in November. If they are not able to, they will need to reroute their shipments through other countries, which will raise their costs. Tea and rice make up the majority of the $2.6 billion in exports from India to Iran. In fact, in terms of value, Iran is India’s largest importer of tea. That means that there could be huge consequences if the new sanctions from the US have an impact on the Indian tea trade.

Even though the sanctions are supposed to curb Iranian oil exports, the tea trade could end up getting caught in the crossfire. Many in the tea industry are probably hoping that if they play online lottery, they can win big, in case the consequences affect them personally. Tea exporters could find it difficult to deal with the US or its allies because US banks will be keeping a close eye on them. If the US doesn’t like India exporting tea to Iran, it could make things worse for the industry.

Last time the US placed trade sanctions on Iran was in 2011-12 under the Obama administration. When this happened, it was agreed between Iran and India that 45 percent of India’s purchase of Iranian oil could be paid back in rupees. It covered products include tea and rice, two of the biggest exports to Iran. It worked well, and many people are hoping for something similar this time around. However, trade between the countries returned to mostly euros and dollars after the sanctions were lifted last time. Iran tends to prefer these currencies because they’re easy to convert.

Some tea companies, such as Asthana, believe that the tea trade can go ahead without suffering any negative consequences. However, others are worried that they could be affected by the sanctions. For this year, at least, the trade sanctions are unlikely to affect the India-Iran tea trade. Since there are still a few months left before they come into place, there’s time to get a lot done.

But, going forward, India might need to think of some smart solutions. Sri Lanka has chosen to pay some of their oil debt to Iran in tea to help them avoid the sanctions. Maybe India will be looking at a similar idea to get around the issue.