India, Iraq to turn energy trade into strategic tie-up

Our Bureau, New Delhi, Aug. 23

India and Iraq have agreed to turn the energy trading relationship into a strategic partnership, including through joint ventures in oil exploration, petrochemical complexes and fertiliser plants. Iraq is the second largest supplier of crude oil to India.

At a meeting between the visiting Iraqi Prime Minister, Nouri Kamil al-Mailiki, and Prime Minister Manmohan Singh here on Friday, Iraq said it will consider India's proposal for a long-term (10-year) agreement to meet the increased crude oil demand by the new refineries.

The Indian side also requested better terms, including abolition of Line of Credit requirement and an increase in the interest-free credit period from 30 to 60 days, which the Iraqi side agreed to consider.

Earlier in the day, at a meeting organised by industry chambers, Al-Maliki said India and Iraq can look at the possibility of trading in their currencies as both countries seek to increase their oil trade and expand cooperation in other areas, including agriculture. A local currency payment mechanism will insulate India's oil purchases from the sharp fluctuations in the rupee value against the dollar and save traders from exchange rate losses.

"We are exploring the possibility of trading in our local currencies — dinar and rupee. Our officials will discuss this," Commerce and Industry Minister Anand Sharma said.

Energy cooperation

A joint statement issued after the talks between the two Prime Ministers said a memorandum of understanding between the two countries will see India and Iraq cooperate in all aspects of the energy sector — upstream, downstream, and related infrastructure.

"The MoU on cooperation in the field of energy will provide a very strong framework to further diversify our cooperation in this sector and we look forward to concrete progress in the near future," Manmohan Singh said, adding that the two sides also agreed to "expand and diversify our economic cooperation, which would cover areas such as agriculture, water resource management, pharmaceuticals, health-care, information technology, infrastructure, low cost housing and trade."

They also agreed to enhance cooperation in the steel sector, including through joint ventures to set up plants in Iraq or in India for production of pipes. The Indian side invited Iraq to invest in an upcoming steel project of Rashtriya Ispat Nigam Ltd. Iraq also agreed to include BHEL as a qualified equipment manufacturer for its power sector.