Iran, India Seek to Broker Oil-for-Steel Agreement that Would Bypass Sanctions

Multi-billion dollar Indian conglomerate Essar Group will seek to work around Western sanctions to broker an oil-for-steel deal with Iran. India is currently one of the National Iranian Oil Company’s largest clients, while Iran continues to purchase significant quantities of Indian steel in spite of comprehensive sanctions that complicate transacting business with NIOC or other Iranian enterprises. The current deal, proposed by the NIOC but backed by and lobbied for by Essar in indian governmental circles, would exempt Essar from paying its share of oil dues, and “offset them” against the proposed $2.5bn sale of Indian steel to Iran.

Currently, sanctions prohibit the sale of metals or materials such as steel to Iran that could potentially have military uses. Attorneys representing Essar are optimistic, however, that the deal will be a success due in part to the deal’s timing. Though no deal has yet been brokered regarding Iran’s disputed nuclear program, progress in negotiations and the very fact that both sides are perceived to be working towards a deal suggests that Western resolve in enforcing each of the sanctions’ stipulation may have weakened. If the deal is a success it could set a precedent for trade relations with Iran while sanctions are still in place and constitute a significant part of the sides’ stated goal of stronger trade relations.

News Briefs:

  • Kazakhstan celebrated the launch of Zharkum, a gas field located in the region of Zhambyl in southeastern Kazakhstan. The new gas field contains approximately 1.3bn cubic meters of natural gas, with the recoverable amount at more than two thirds of the total. KazTransGas will head up operations and extraction, issuing a statement that the gas will provide fuel to the region for up to 27 years and due to better heat transfer will be more efficient than gas imported from Uzbekistan. With the addition of Zharkum Kazakh gas production in 2015 will exceed 380 million cubic meters per day.
  • The Iranian oil minister declared his country’s position to be similar to that adopted by Saudi Arabia with regards to global oil markets. Officials in Saudi Arabia recently announced that they will not favor output curbs as a way of combatting falling oil prices. The statements came following meetings between the Iranian oil minister and his Saudi counterpart, and another string of assurances that the market will “correct itself” in the coming months. The OPEC countries have adopted a unified policy position despite initial disputes with Iran.
  • A violent series of attacks carried out by the Taliban shook Kabul’s diplomatic district earlier this week. Taliban suicide bombers targeted Wazir Akbar Khan, an area of Kabul in which many foreign embassies are found, while simultaneously launching an attack on a British diplomatic convoy, killing at least six. A third attack was also realized when Taliban fighters opened fire on an Afghan military base in the area. The three attacks brought the number of Taliban offensives within Kabul to eight in the past week alone.
  • The Kyrgyz government is scrambling to mitigate the country’s ongoing energy crisis. An abnormally cold winter and heavy snowfall has led to spikes in electricity usage throughout the country The government has announced plans to increase electricity imports from Kazakhstan and ramp up production at the Bishkek Heat and Power Plant to generate an additional 380 million kilowatts of electricity, a task that will necessitate significant government spending to obtain the coal required to increase production.
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