Crude shock

Wider geopolitics appears to be at play behind the US move to end Iran oil sanction waivers

AuthorPublished: 25th Apr 2019  12:15 amUpdated: 24th Apr 2019  9:35 pm

The United States’ announcement that it would end the sanction waivers to India and seven other countries if they continue to import oil from Iran must be seen as yet another bullying tactic from the Trump Administration. The US fiat means that these countries cannot buy crude oil from Iran after May 2, when exemptions expire. This could badly hit import-dependent countries like India with a cascading effect on the prices of essential commodities. Though New Delhi has put up a brave front saying a robust alternative plan was in place with additional supplies being firmed up from other major oil producing countries to compensate for the loss of Iranian oil, the impact would be hard to absorb. Moreover, the refineries in India are configured for the particular variety of Iranian crude. India was among the countries that were granted exemptions from US sanctions after the Trump administration decided to pull out of its 2015 nuclear deal with Iran. Driven by America’s aim to choke Iran’s main source of revenue, the removal of exemptions is expected to have a major fallout on the crude oil market. The soaring crude oil price, voluntary production cut by the Organisation of Petroleum Exporting Countries (OPEC) and drop in supplies from Venezuela have already tightened the energy market. India was all along hoping that the US would not insist on reducing the Iranian oil imports to zero level. India’s dependence on oil imports is close to 80% and it has no wherewithal to influence global oil prices. Iran is India’s third-largest oil supplier after Iraq and Saudi Arabia, with about 30 million tonnes of crude being imported last year.

It is not just the oil but wider geopolitics appears to be at play behind the US move. Despite strong civilisational ties and economic cooperation with Iran, India needs to balance its interests in tune with the changing power equations in the region with the Arab countries taking a stronger position against Iran-Syria axis at the behest of the US. It is possible that America wants India’s compliance on Iranian oil issue in return for its cooperation in the UN on getting the JeM chief Masood Azhar designated as a global terrorist. There has been growing bilateral cooperation on counter-terrorism strategies. The US is also helping India’s cause by mounting sustained pressure at the Financial Action Task Force (FATF) to hold Pakistan accountable for supporting terrorist outfits on its soil. However, revocation of the US exemptions should not affect India’s investments in Chabahar port in Iran, a great example of the converging trade interests between the two countries. The port will not only open a new gateway to landlocked Afghanistan but also bypasses Pakistan, thereby breaking its stranglehold.


Now you can get handpicked stories from Telangana Today on WhatsApp / Telegram everyday. Click this link to subscribe and save this number 9182563636 on your contacts.