The ambitious and oldest joint venture of the Shipping Corporation of India (SCI) is caught in a diplomatic whirlpool over Iran, forcing the company to consider severing its ties with Tehran's national maritime carrier.
As the issue is ridden with political sensitivity, the SCI has sought the ministry of external affairs' opinion as international sanctions can make the profit-making unit incur huge losses.
The JV, which began in 1974, with the Irano Hind Shipping Company has a book value of $179 million where SCI holds 49% while the remaining is with the Islamic Republic of Iran Shipping Lines (IRISL).
The JV has UN sanction (UNSCR 1929), which India is duty-bound to adhere to but what also makes the partnership tougher is the consistent ire of the US against IRISL.
"How long can we keep the vessels idle, incurring huge losses in their upkeep," an official said.
The immediate trouble that the joint-venture faces is that India is unable to do anything with the seven vessels it has besides it is also facing a huge financial loss in the form of a deal worth $84 million with Korean company Huyndai for a new vessel.
For a new vessel, Taj Mahal, the JV has already paid $60 million. The Korean firm, is not accepting the remaining money due to fear of sanction violation.
There is also a lurking fear that the seven vessels may be confiscated on some pretext as the US is tightening the noose around the IRISL.
US under secretary for Terrorism and Financial Intelligence Stuart Levey had in December 2010 said: "IRISL, which we designated in 2008, has renamed and even repainted ships, and changed the nominal ownership of vessels, all to hide their connection to the shipping company."
The US's sanction strategy is made clear in that testimony, "...by concentrating our sanctions programs on Iran's illicit conduct and its perpetrators - for example, the Islamic Revolutionary Guard Corps and IRISL -we sought to maximise the chances of achieving a truly multinational coalition, because it is difficult for any government to oppose taking action against such activities".