India’s Essar Group, is mulling a new way to sell steel to Iran that may not fall foul of financial sanctions imposed on the Islamic republic.

The Indian multinational conglomerate is contemplating a proposal made by the National Iranian Oil Company (NIOC) to tap frozen Iranian oil revenues to pay for its steel exports to Iran.

Payment obligations
The payment mechanism, proposed by NIOC in August, suggests that the Indian government could be released from its obligations to pay its share of oil dues to Tehran.

Instead, Essar would offset these payment obligations against a US$2.5 billion deal to supply steel to a NIOC affiliate.

Contraventions
Under Western sanctions, supplying steel to Iran is prohibited. Dealing with NIOC may also contravene sanctions legislation.

But some commentators have suggested that the deal may be acceptable, particularly as there is now a substantial constituency in the West that is minded to soften its approach to sanctions imposed on Iran in response to its nuclear strategy.

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