Sanctions to shut Indian-Iranian shipping company

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By BRIAN MURPHY and ERIKA KINETZ, Associated Press

DUBAI, United Arab Emirates (AP) — An Iranian-led shipping venture that predates the 1979 Islamic Revolution is now unraveling as one of the most high-profile blows from international sanctions and U.S.-driven efforts to drive wedges between Tehran and its key trading partners.

The impending collapse of the Irano Hind Shipping Co. — created in 1974 with India's state-run maritime firm — is likely to be noted in Washington and among allies as evidence of the deepening wounds from the diplomatic and economic onslaught over Iran's nuclear program.

But in another sense, it illustrates the growing strains in Asian capitals over the economic squeeze on Tehran. Leaders in India and elsewhere must now balance crucial needs for Iran's energy exports with mounting demands from their American allies to freeze out the Islamic Republic.

The top executive of the Indian side of Irano Hind said Wednesday it had become too difficult to operate the fleet's seven vessels under sanctions — imposed by the U.S. in 2008 and U.N. two years later for the company's connections to the state-owned Iranian shipping line.

"The fleet will be split between the two partners," Sabyasachi Hajara, chairman and managing director of Shipping Corp. of India, told The Associated Press. "Irano Hind will cease operation."

He said the decision to dissolve the company was made last week at an Irano Hind board meeting and must be approved by the two governments and the United Nations. Officials at the company's majority-share partner, the state-run Islamic Republic of Iran Shipping Lines, or IRISL, could not be reached for immediate comment.

India is one of the main targets of U.S. attempts to chip away at Iran's critical commercial lifelines across Asia. In May, U.S. Secretary of State Hillary Clinton visited New Delhi to urge leaders to further cut back on oil imports from Iran — still about 9 percent of India's fast-rising energy demand — and turn more to other suppliers such as Saudi Arabia.

It's an appeal that Washington has been pushing to Iran's other key oil customers in Asia such as China and South Korea. The pressure is likely to grow even stronger with Tehran feeling a greater sting after the 27-nation European Union closed its doors to Iranian oil this month.

Yet it's also a hard sell in places such as India, which see no comprehensive alternatives to Iranian oil and are wary about damaging overall relations with Tehran. New Delhi even crafted a work-around after sanctions last year closed off Iran's access to international banking networks. Under the agreement, India would pay for about 45 percent of the purchases in rupees and Tehran would use the Indian currency to buy goods from India.

Shipping industry expert Shailesh Garg said the economic fallout from Irano Hind is "nominal," but it touches on major political quandaries for India and other Asian countries that rely on Iranian oil.

"They don't really want to succumb to the pressures of the sanctions," said Garg, who heads the Indian office of London-based Drewry Shipping Consultants. "Oil from Iran is one of the cheapest sources for us. The government has to take a balanced view ... and not just ignore their own interest."

The joint venture — IRISL with 51 percent to the Indian side's 49 percent — was formed by Iran's former Shah Reza Pahlavi and the late Indira Gandhi of India as a bond of friendship. The company was among the few international business pacts that survived the upheavals of the Islamic Revolution and then managed to ride out decades of Western isolation against Tehran's Islamic rulers.

But years of escalating sanctions have taken a toll. Officials at India's Shipping Ministry have reportedly raised alarms about growing losses at Irano Hind and difficulties to find insurance to carry Iranian oil.

Meanwhile, the U.S. and allies have pressed nations with traditions of maritime registry — so-called flags of convenience — to shun Iranian vessels. The ships in the Irano Hind fleet traditionally flew a Maltese flag, but since April they mostly have been flying under the flags of Tanzania and Sierra Leone, according to Richard Hurley, a data specialist at maritime information service IHS Fairplay. None uses an Iranian flag.

Last week, the U.S. Treasury Department cited IRISL for trying to evade sanctions "through deceptive practices" such as operating ships whose flags have been revoked. In June, Sierra Leone became the latest country to revoke flags for Irano Hind's tanker Amin, the Treasury said.

Cracks in Iran's economy are increasingly visible on all levels, from rising prices of imported goods to shrinking markets for Iran's oil, which brings in 80 percent of the country's foreign currency revenue. Top officials, including Supreme Leader Ayatollah Ali Khamenei, have issued an effective gag order on domestic media over coverage that highlights economic problems.

But it hasn't appeared to weaken Iran's resolve over its nuclear program, which the West fears could eventually lead to atomic weapons. Iran insists it only seeks reactors for energy and medical applications.

"They (the West) explicitly say they need to increase pressures, tighten sanctions to force Iranian authorities to reconsider their calculations," Khamenei said in comments broadcast on state television Wednesday. "But a look at the facts leads us not only to avoid reconsidering our calculations, but to move on our intended path with greater confidence."

He added: "Although there are challenges in the path of the Iranian nation, there is no dead-end."

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Kinetz reported from Mumbai. AP Business Writer Adam Schreck in Dubai, United Arab Emirates, contributed to this report.

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