U.S. seeks Indian assurance on Iran as Clinton visits

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The United States will seek assurances that India will reduce its purchases of oil from sanctions-hit Iran during a visit by Secretary of State Hillary Clinton to the South Asian giant this week, a senior U.S. official said on Sunday.

Clinton started a three-day trip to India on Sunday that will coincide with a visit by a large Iranian trade delegation, as India walks a tightrope of strengthening ties with ally the United States and sating its fast-growing energy needs.

During her visit, Clinton will also make the case for the country to open its supermarket sector to foreign chains such as U.S. giant Wal-Mart Stores (WMT.N) - a major economic reform that has stalled under Prime Minister Manmohan Singh's government.

India has publicly rejected Western sanctions but has pushed refiners to cut imports of oil from Iran by 15-20 per cent - enough, it hopes, to win a waiver from Washington.

The United States in March granted exemptions to Japan and 10 European Union nations from its sanctions, which are aimed at pressuring Iran to end its nuclear programme. India and China, Iran's biggest buyers of crude, remain on a list at risk if they do not cut oil imports ‘substantially’.

"Our assessment is India is making good progress but we really need to receive assurances that they are going to continue to make good progress," a senior U.S. official, travelling with Clinton, told reporters.

The 56-member trade delegation, led by the president of Iran's chamber of commerce, will also arrive on Sunday for another round of talks on how the two can trade via a rupee mechanism set up to skirt sanctions. A previous trade mission of Indian businesses to Iran in March had proved unproductive.

"These are not going to be strategic trades of any kind," the U.S. official said. "So I don't think that we are too concerned about this, but we'll obviously want to hear from the government what they see as the focus of this trade delegation."

Retail reform shelved

Relations between the United States and India have blossomed in recent years, especially during the presidency of George W. Bush, which signed a landmark civilian nuclear pact with India. But irritants, especially over trade and investment barriers, have raised temperatures of late.

Clinton started her visit to India in Kolkata, home to the most powerful ally in Singh's coalition government, Mamata Banerjee, who had blocked the government's push for retail liberalisation last year.

The policy - which would allow foreign firms to buy a 51 per cent share in an Indian retailer selling more than one brand - is one of several reforms that stalled in Singh's second term, which has been overshadowed by scandals and a slowing economy.

Opponents of the reform say it would result in huge job losses in India's retail sector, which is mostly made up of mom-and-pop stores.

"She's also somebody who's got quite a lot of influence," the U.S. official said, when asked why Clinton was meeting Banerjee before heading to the capital.

"She put her foot down about the retail decision. Certainly we'd like to talk about that. My sense is that she's not opposed to the retail overall, she just perhaps felt that she wasn't properly consulted about it."

Clinton arrives in India leaving behind her a stormy visit to China, which saw Beijing and Washington tussle over the fate of a blind Chinese human rights activist who had escaped 19 months of house arrest and fled to the U.S. embassy.

From Kolkata, Clinton will travel to New Delhi on Monday to meet Singh. Afghanistan and India's controversial proposals on retroactive taxation are likely talking points, sources said.