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Explained: US Sanctions An Indian Company For Dealing In Iranian Oil, What It Means And Why Is Iran Sanctioned

Explained: US Sanctions An Indian Company For Dealing In Iranian Oil, What It Means And Why Is Iran Sanctioned

Mumbai-based Tibalji Petrochem has been sanctioned for facilitating sale of Iranian petro-chemical products from a sanctioned entity to China.

An Indian company has been sanctioned by the United States over Iranian petrochemicals' purchase
An Indian company has been sanctioned by the United States over Iranian petrochemicals' purchase AFP (From Outlook 09 December 2013)

The United States this week sanctioned an Indian company for trading in Iranian petro-chemicals. 

This is the first time that an Indian company has been sanctioned for dealing with Iran. Earlier, Iran used to be major supplier of crude oil to India but India gradually reduced purchase of Iranian oil because of American sanctions. 

The Mumbai-based Tibalaji Petrochem Private Limited has been sanctioned for being a mediator of an already-sanctioned entity and sending Iranian petro-chemical products to China. Besides Tibalji, 10 companies and one ship were sanctioned this week.

Here we explain why the United States has sanctioned the Indian company, what would be its implications, and why Iran has such sanctions on it.

Why US sanctioned Tibalji Petrochem?

The companies, including the Mumbai-based Tibalji, are brokers and front companies of Iran, according to the US Department of Treasury.

These companies dealt with two already-sanctioned companies —Triliance Petrochemical Co. Ltd and Persian Gulf Petrochemical Industry Commercial Co. (PGPICC)— and allowed them to transfer large quantities of Iranian petroleum and petro-chemicals to Asian countries including China. 

The US Treasury said, "These entities have played a critical role in concealing the origin of the Iranian shipments and enabling two sanctioned Iranian brokers, Triliance Petrochemical Co. Ltd. (Triliance) and Persian Gulf Petrochemical Industry Commercial Co. (PGPICC), to transfer funds and ship Iranian petroleum and petrochemicals to buyers in Asia.

Tibalji has been sanctioned for facilitating the sale and supply of petro-chemicals from Triliance to China. Triliance was sanctioned in 2020.

"India-based petrochemical company Tibalaji Petrochem Private Limited has purchased millions of dollars’ worth of Triliance-brokered petrochemical products, including methanol and base oil, for onward shipment to China," said the US Treasury.

Triliance is at the centre of these latest round of sanctions and Tibalji is just one of the many companies sanctioned for their dealings with Triliance.

Other companies used as fronts by Triliance are:

  • Sierra Vista Trading Limited, Hong Kong
  • Clara Shipping LLC, UAE
  • Virgo Marine, UAE

The formal charges against Tibalji and a bunch of other companies are — materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services in support of, Triliance.

Why has US imposed sanction on Iran?

The United States has placed a range of sanctions on Iran since the Islamic Revolution of Iran in 1979 when the liberal pro-West monarchy was overthrown and was replaced by an ultra-conservative Islamic state hostile to the United States and the West.

The santions in the discussions are over the Iranian nuclear program. It's believed that Iran is on its way to develop nuclear weapons and sanctions are part of the US efforts to deter it by imposing high economic costs on it. 

The US Treasury said, "As Iran continues to accelerate its nuclear program in violation of the JCPOA, we will continue to accelerate our enforcement of sanctions on Iran’s petroleum and petrochemical sales under authorities that would be removed under the JCPOA."

The JCPOA —Joint Comprehensive Plan of Action— has been commonly known as the "Iran nuclear deal". It was signed between Iran and China, France, Russia, the United Kingdom, the United States, and Germany. 

"Under its terms, Iran agreed to dismantle much of its nuclear program and open its facilities to more extensive international inspections in exchange for billions of dollars’ worth of sanctions relief," notes the Council for Foreign Relations (CFR). 

The United States walked out of it under former President Donald Trump, following which Iran began to go back on the terms of the deal.

"Iran started exceeding agreed-upon limits to its stockpile of low-enriched uranium in 2019, and began enriching uranium to higher concentrations (though still far short of the purity required for weapons). It also began developing new centrifuges to accelerate uranium enrichment," notes CFR.

The West and Iran are negotiating a return to the deal but no conclusive progress has been made so far. As a result, the United States continues to press sanctions in hope that mounting economic costs would lead the Iranian leadership to get back sincerely to the negotiating table.

Implications of US sactions

The sanctions mean that all assets of the sanctioned entities in the United States or in control of American nationals or entities would be frozen.

This freezing would extend to entities or assets owned directly or indirectly by the sanctioned entities. The sanctioned entities would therefore be cut off from the US financial system.

Moreover, any non-US financial institution dealing "significantly" with these sanctioned entities is also exposed to sanctions. 

The US Treasury said, "All property and interests in property of these targets that are in the United States or in the possession or control of US persons must be blocked and reported to OFAC [Office of Foreign Assets Control].

"In addition, any entities that are owned, directly or indirectly, 50 per cent or more by one or more blocked persons are also blocked. OFAC's regulations generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons."

The OFAC is the US Treasury's body that deals with sanctions.

"The United States is committed to severely restricting Iran's illicit oil and petrochemical sales. So long as Iran refuses a mutual return to full implementation of the Joint Comprehensive Plan of Action, the United States will continue to enforce its sanctions on the sale of Iranian petroleum and petrochemical products," said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E Nelson.

All of these sanctions are reversible "in the event of Iran’s return to JCPOA compliance".

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