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India seeks ways to continue Iran oil imports

NEW DELHI: India hopes to avoid an abrupt end to oil imports from Iran without triggering sanctions even as it readies a rupee payment mechanism for oil imports from the Islamic Republic.

The US and India haven’t had any conversation yet on possible exemption but officials believe that the door for negotiations is still open despite strong words from the US recently to eliminate oil import from Iran.

Officials see a window of opportunity because a recent update in the US treasury’s website lists circumstances in which the US government can waive sanctions.

The tough words from the US are certainly aimed at the better compliance of sanctions by all countries as well as at making it harder for importing countries to negotiate waivers, an official said.

The US is probably trying to lower importing countries’ expectations before any negotiation on waivers start, he said.

It has been learnt that Nikki Haley, the US envoy to UN and close Trump aide, during her recent visit to Delhi called for cutting import of Iranian oil, but was politely told that it would be extremely difficult for India to make any significant cut. Ties between India and Iran range from the energy trade to connectivity projects, and cutting trade between the two countries could hurt India’s long-term interests, experts said.

Indian and US officials are likely to meet this month to figure out the implications of the Iran sanctions for India. There are some hints from the US of possible exemptions to purchase a reduced quantity of oil from Iran, officials said.

On June 26, a US state department official said India or China would receive no waiver of sanctions and their companies risk secondary sanctions if they continued importing oil from Iran from November 4.

But just the next day, on June 27, the US Treasury Department updated its FAQs on Iran sanctions, leaving scope for the waiver, an Indian official said, citing this as a sign that the US would be amenable to discussing exemptions.

The FAQs refer to a provision for waiver of the sanctions if the secretary of the treasury determines that a waiver is necessary to the national interest of the United States.

The document also provides for the secretary of state, in consultation with other secretaries, determining if any country has ‘significantly reduced the volume of Iranian crude oil purchase’. The secretary of state would ‘consider relevant evidence in assessing each country’s efforts to reduce the volume of crude oil imported from Iran’.

For Indian officials, these words represent US flexibility in dealing with certain importers like India if the latter were to make efforts towards reducing supplies from Iran over a period of time.

RUPEE PAYMENT MECHANISM
Meanwhile, India is preparing a rupee payment mechanism for Iranian oil import. “We are coordinating with the central banks of India and Iran to put together this mechanism. More than one Indian banks are available for this,” an official said.

During the last sanctions, UCO Bank alone handled rupee payment for oil imports from Iran. Part of the rupee payment was used by Iran for purchasing food, drugs and chemicals from India but most of it was transferred to the Islamic Republic after the sanctions were lifted in 2016.

It wasn’t clear if India would persist with imports from Iran if the US waivers didn’t materialise. During the last Iran sanctions, US had allowed India to import certain quantity for which the payments were made in the rupee. Officials didn’t say if the companies will be able to, or want to, use the rupee payment mechanism without the waiver because that could mean antagonising the US.

Huawei to pack less of a punch in the new year after bruising 2020, analysts say

SHENZHEN: Huawei Technologies Co Ltd this year will likely see slower 5G business and push further into software, while hoping its smartphones get a reprieve from U.S. sanctions which last year struck the chip-reliant heart of its group, analysts said.

Limited access to high-end semiconductors means rationing during China’s network upgrade, they said, while the dissection of its mobile arm will send Huawei tumbling down rankings while it continues to develop a proprietary operating system.

China’s leading telecommunications equipment maker found itself on a U.S. trade blacklist in May 2019 due to national security concerns. Huawei has repeatedly denied it is a risk.

That effectively banned U.S.-based firms from selling Huawei essential U.S. technology. Last August, the ban was extended to foreign firms with U.S. business, reaching chief suppliers such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC).

The change hit an Achilles heel as Huawei depends on TSMC to make advanced chips for its handsets, fifth-generation (5G) network base stations, servers, cloud computing and artificial intelligence products, said Paul Triolo, head of global tech policy at Eurasia Group. Stockpiles only last so long, he said.

“Passage of this death sentence does not involve a swift execution,” technology analyst Dan Wang said in a client note. “Instead, the process is much more like a slow strangulation.”

Huawei declined to comment.

Wang said Huawei will feel the impact most acutely in its consumer business, which brought in 54% of revenue in 2019.

In November, Huawei spun off budget smartphone line Honor in a sale founder Ren Zhengfei said would allow the brand to regain access to chips. Huawei could look to do the same with its premium lines this year, Triolo said.

Huawei was the world’s biggest smartphone maker as recent as the second quarter of 2020, but the Honor sale and chip shortage will likely take it out of the top six this year, said data firm Trendforce.

Its luck may change with the U.S. presidential inauguration of Joe Biden, from whom analysts expect more leniency towards Huawei’s smartphone business. The inauguration this month comes as Chief Financial Officer Meng Wangzhou discusses a deal with U.S. prosecutors over allegations of doing business with Iran.

In the meantime, Huawei will likely focus on the Harmony operating system it is developing for its smartphones after being cut off from Alphabet Inc’s Android, said Nicole Peng, VP of Mobility at consultancy Canalys.

Elsewhere in software, Huawei will likely pivot more towards services such as cloud computing and internet-of-things devices, though these are unlikely to offset slowdown in smartphones and telecommunication infrastructure, analysts said.

Huawei’s network business does have bright prospects, but with major markets such as Britain and Japan banning its equipment, it will likely focus on China, analysts said.

The company has enough chips to make around 500,000 5G base stations, said Jefferies analyst Edison Lee. Yet rather than use up that supply, the government will likely slow 5G introduction, taking “a middle-of-the-road approach to balance between expanding coverage and waiting for Huawei to catch up,” he said.