India-Iran trade unlikely to be derailed by Delhi bombing

Police cover a damaged Israeli embassy car before it was towed away from a police station to another police station in New Delhi February 14, 2012.

ISLAMABAD (Reuters) - Trade between New Delhi and Tehran is unlikely to be affected by a recent bomb attack on Israeli targets in the Indian capital, Commerce Minister Anand Sharma said on Wednesday, despite Israel's accusations and Western sanctions against Iran.

Sharma was in Islamabad heading the first ministerial-level trade delegation to India's neighbour and rival Pakistan in decades and added that the investigation is ongoing.

"I don't think that trade and these things are inter-related," he told Reuters. "The investigations are on, and those behind this serious attack will be brought to justice."

Israel accused arch-enemies Iran and its Lebanese militant ally Hezbollah of being behind twin bomb attacks that targeted Israeli embassy staff in India and Georgia on Monday. Tehran has denied involvement in the attacks, and India has been pointedly silent on Israel's accusation.

But the head of a trade association in India said he feared the bombing would undermine the country's determination to pursue trade with Iran as wary exporters back away from fresh deals.

"The attack and its political fallout have clearly vitiated the atmosphere. Traders who were already losing money due to payment defaults will be extremely wary of continuing their trade with buyers in Iran," Vijay Setia, the president of the All India Rice Exporters' Association, told Reuters.

India has not gone along with new financial sanctions imposed by the United States and European Union to punish Iran over its disputed nuclear programme. Instead, New Delhi has come up with elaborate trade and barter arrangements to pay for oil supplies.

New Delhi has good relations with both Iran and Israel, and so the attack makes its diplomatic balancing act between the two countries all the more difficult, and has thrust the mounting tension between the Middle East rivals onto its doorstep.

(Writing by Chris Allbritton; Editing by Sanjeev Miglani)