BEIJING/HAMBURG, Feb 10, (Agencies): China said on Friday it would send a senior official to Tehran to discuss Iran’s nuclear standoff with the West, and India indicated it would also weigh in, as Asia’s two giants seek to head off new sanctions already playing havoc with trade.
New financial sanctions imposed by the United States and European Union are making it difficult for Iran to pay for staple food and other imports, causing hardship for its 74 million people with just weeks to go before an election.
Commodities traders revealed this week that Iran has resorted to barter trade — swapping gold bullion in overseas vaults or tankerloads of oil for food — to avoid payments problems in international banks over sanctions.
On the streets of Iran, prices for food in dollar terms have doubled or tripled in recent months.
In the latest evidence of trade disruption, metal traders said Iran’s imports of steel for construction had collapsed because sanctions prevent buyers from obtaining the currency needed to purchase it.
The International Energy Agency, which monitors oil markets for developed countries, said on Friday EU oil sanctions and US financial measures due to take effect over the course of the next several months were already hitting global trade flows.
In an analysis ominous for Tehran, the IEA also said there was enough oil supply worldwide to prevent a price shock if Iran is blockaded this year.
That makes it easier for Washington to impose harsh sanctions envisioned under a new law which requires President Barack Obama to assess the impact on energy markets before pressing ahead with its most draconian measures.
“The market in 2012 likely has sufficient supply-side flexibility” to adjust to any loss in Iranian volumes due to sanctions, its monthly report said. It cited softer demand growth, Saudi spare capacity and the resumption of supplies from Libya that were disrupted last year.
China’s Foreign Ministry said on Friday Assistant Foreign Minister Ma Zhaoxu would head to Iran for talks on Sunday.
“We have consistently advocated dialogue as the only proper channel for resolving the Iran nuclear issue,” ministry spokesman Liu Weimin told a regular news briefing. Ma will “have a further exchange of views with Iran over its nuclear programme”, he added.
China is one of six powers — along with Britain, France, Germany, Russia and the United States — negotiating with Iran over its nuclear programme, which Western states say is aimed at building a weapon but Iran says is peaceful.
Those talks collapsed a year ago and show little sign of resuming. Iran refuses to negotiate over its uranium enrichment programme and Western countries say there is no point in talking unless uranium enrichment is on the table.
China is also Iran’s biggest trade partner, buying a fifth of Iran’s oil exports last year.
If Iran is to endure sanctions without severe pain, it would need China to keep buying its oil and even increase its purchases to make up for lost sales to Europe. But China has been playing hardball with Iran, seeking steep discounts for oil, cutting its purchases this year by more than half and securing alternative supplies from Russia and Saudi Arabia.
Cuts in Chinese oil purchases make India the biggest buyer of Iranian oil this year. A payments system for trade between India and Iran was shut down last year under US pressure. Under a new agreement, Iran is meant to accept 45 percent of the value of its oil in Indian rupees to buy Indian goods, but the system is not yet running while India decides how such transactions would be taxed. Indian traders have had difficulty receiving payment for rice and tea they send to Iran.
European Council President Herman Van Rompuy, visiting India, said the EU also wanted Delhi to help press Iran to give up its nuclear programme to end sanctions.
“In order to achieve that result, you need more pressure on Iran, more sanctions on Iran,” he said.
India’s Prime Minister Manmohan Singh defended India’s trade ties with Iran, and leant Delhi’s backing to diplomacy.
“Iran is a close neighbour. It is an important source for our energy,” he said. “There are problems with Iran’s nuclear programme. We sincerely believe that this issue can be and should be resolved by giving maximum scope to diplomacy.”
Iran is heavily dependent on imports to feed its people, buying 45 percent of its rice and most of its animal feed abroad. Trade problems caused by sanctions appear to be worsening inflation already high because of President Mahmoud Ahmadinejad’s economic policies, which have replaced subsidies for basic goods with cash payments to families.
The result is severe hardship for many ordinary Iranians, with just three weeks to go before a parliamentary election that will pit Ahmadinejad’s supporters against conservatives who oppose his economic reforms. Reformists — either barred or boycotting — are barely represented.
The election will be Iran’s first since a presidential vote in 2009, when Ahamadinejad’s disputed victory over reformist opponents triggered eight months of violent street protests. That uprising was put down by force, but since then the “Arab Spring” has shown the vulnerability of authoritarian governments in the region to public anger over economic hardship.
The latest disruptions in Iran’s trade have been caused in part because agents in the United Arab Emirates were no longer permitted to act as middlemen and process payments for Iranian buyers of imported commodities.
Shipments of palm oil from Indonesia and Malaysia — which represent 90 percent of the global supply of the vegetable oil staple — have been halted. Grain ships have been diverted.
Iran is one of the world’s biggest importers of billet, or semi-finished steel bars, used in construction. A steel trader at a Swiss metals trading house said: “Now you can feel the effects of the sanctions imposed by the US and Europe... It is very difficult to do any business with Iran at the moment.”
Boris Krasnojenov, an analyst with Moscow-based Renaissance Capital, said the collapse in trade with Iran was a major problem for Russian steel plants. It has depressed international prices, knocking nearly 10 percent off the price of Russian and Ukrainian steel over the past month.
Disaster
A military strike against Iran would be a disaster, Turkish Foreign Minister Ahmet Davutoglu said on Friday following months of speculation that Israel might attack Iranian nuclear facilities.
“A military strike is a disaster. It should not be an option, especially at this historic turning point in our region,” Davutoglu said in an appearance at a Washington think tank. “We will never, never endorse any military strike.”
Iran’s official news agency reported Thursday that the navy has added two more domestically built light submarines to its fleet.
The move is seen as part of Iran’s effort to upgrade its defense capabilities amid escalating tension with the West over its nuclear program. Tehran has threatened to close the strategic Strait of Hormuz, a major oil shipping route, over new US sanctions targeting its critical oil industry.
The report by IRNA quoted Iran’s navy chief Adm. Habibollah Sayyari as saying the Ghadir class submarines meet the needs of navy.
In November, Iran said it added three more Ghadir class submarines to its naval fleet. This class of submarine can fire missiles and torpedoes and operate in the Gulf’s shallow waters.
Iran is believed to have about 12 light and three Russian-made submarines in its fleet, but it does not disclose the total numbers.
Extradition
A Singapore judge Friday allowed the extradition to the United States of four Singaporeans accused of illegally selling US-made radio components to Iran that ended up in Iraqi roadside bombs.
The judge ordered the four committed to prison pending an extradition order by Singapore Law Minister K. Shanmugam, who is also the foreign minister.
The US government immediately welcomed the decision even though the four electronics company employees, who strongly denied deliberately violating US laws, were given 15 days to contest the judge’s ruling.
“This ruling reflects the strong spirit of cooperation between the United States and Singapore in combating transnational crime, including the illicit trade in arms and equipment that can pose significant threats to the United States and the international community,” said US Ambassador David Adelman.
A US embassy statement said the four had been charged with violations of American laws relating to fraud involving the “unlawful export from the United States of military antennas and radio frequency modules”.
The four suspects were all in the electronics parts distribution business when they were arrested in October and will be tried in a District of Columbia court if extradited.
“I have no doubt they will be accorded a fair trial by the US courts,” District Court Judge Chia Wee Kiat said.
He said all the court needed was to “consider if there is a prima-facie case” and that this had been established during the hearings.
In court statements in December, Wong Yuh Lan, Lim Yong Nam, Lim Kow Seng and Hia Soo Gan Benson rejected US charges that they had conspired to evade a US trade embargo against Tehran.
They were arrested by Singapore police on US charges of illegally exporting US-made radio equipment to Iran including 6,000 radio modules and 55 antenna parts, some of which were found in bombs targeting coalition forces in Iraq.