New Delhi, February 15
While India is facing increasing pressure from the US and other Western countries to snap trade ties with Iran, it will have to weigh its options carefully as Iran is not just an important crude oil supplier but is also a prospective large export market.

The sticker bomb attack on an Israeli diplomat in New Delhi on Tuesday has left India in a delicate situation caught in the crosshairs of an international tug of war between Iran and the US, EU and Israel seeking to impose a trade embargo and other sanctions to isolate Tehran.

India till now has been holding out and has continued to trade with Iran of which oil import is a critical component. Oil import from Iran this year is estimated at 13 million tonnes in a total import basket of 165 million tonnes, accounting for a little more than 7 per cent of the total import.

Commerce Minister Anand Sharma, who is on a visit to Pakistan, said the recent incident would not affect the trade ties between the two countries.

In the eventuality of a freeze on supplies from Iran, sources said other suppliers are available and there will be no impact on meeting India’s energy requirements. Saudi Arabia has already offered India more crude supplies if it ceases ties with Iran. With Iran, India has been trying to work out a payment mechanism in rupee terms and also through a barter arrangement in which India can export what Iran needs and get oil in return which is mutually convenient.

Experts say even in an embargo sometimes there are arrangements through which Iran may also continue to supply oil not directly but through international trading companies.

However, India is not just one of Iran's biggest oil buyers, but also views it as a large export market for its goods. Federation of Indian Export Organisation (FIEO) is leading a delegation of exporters to Iran from March 10 where it expects to boost opportunities.

M Rafeeque Ahmed, president, FIEO, said Iran is an emerging destination for Indian exports. During the last financial year, despite banking uncertainties, India’s exports went up by about 50 per cent to touch $2.71 billion, he said.

He pointed out that once the Rupee payment mechanism starts operations, India would be able to increase exports exponentially. He said India could easily increase exports to over $5 billion by 2013-14 and hoped that the business delegation would be able to materialise new contracts during its visit to Iran. Industry body Assocham said though the recent bomb attack on Israeli targets in New Delhi have vitiated the atmosphere, the trade between India and Iran was unlikely to be affected.

The potential of trade and economic relations between the two countries can touch the level of $30 billion by 2015.