Politics Of Oil: India Can Buy Iranian Oil Even After USA's "Toughest Ever" Sanctions On Iran
On Monday, November 5, the USA re-imposed sanctions on Iran and Iranian oil. US President Trump referred to these sanctions as the “toughest ever” before adding that he does not want to “lift oil prices” in the world market. This action reportedly intends to alter the Iranian regime’s behaviour towards its nuclear programme. However, eight countries, including India, are “temporarily” exempted from this ban.
The US President said, “I’m not looking to be a great hero and bring it down to zero immediately. I could get the Iran oil down to zero immediately, but it would cause a shock to the market. I don’t want to lift oil prices,” as reported by NDTV.
His reply was in response to the reporters’ questions who asked about the exemptions given to eight countries from the Iran oil ban.
Sanctions on Iran
In 2015, the mercurial president Trump’s predecessor, Barack Obama signed the Joint Comprehensive Plan Of Action (JCPOA) or the Iran nuclear deal. The multilateral agreement meant that sanctions on Iran were lifted. However, in May 2018, President Trump decided to pull out from the deal, and these unilateral sanctions on Monday are a consequence of the same.
The re-imposed sanctions target Iran’s shipping, banking and energy sectors and are a way to cut-off its revenue supply. As reported by USA Today, the US Secretary of State Mike Pompeo said, “Our objective is to starve the Iranian regime of the revenue it uses to fund violent and destabilizing activities throughout the Middle East and indeed around the world.”
Pompeo added that “temporary” waivers have been given to several allies and he reiterated the point made by his President, that the waivers are a way to ensure market does not suffer a shock. The exempted countries are, namely, India, China, Japan, Italy, Turkey, South Korea, Greece and Taiwan.
Notably, China and India are the two biggest buyers of Iranian oil. Reportedly, the Trump administration dodged questions on when these sanctions will be imposed on the exempted countries. This move has drawn flak from the conservative hard-liners (usually Trump supporters) for not being strict enough, while others are saying this will tilt the US dependency on Saudi Arabia at a time when the Saudi government is under the scanner for the alleged murder of the journalist, Jamal Khashoggi. Moreover, the latest mid-term election results in the USA saw the Democrats taking back the lower house and hence, increasing the difficulties of Trump, even though the Republicans have a firm grip on the Senate (upper house).
However, the Iranian President Hassan Rouhani reportedly said, “The fact that today, the United States exempts eight countries for buying Iran’s oil, while it explicitly said that it will reduce Iran’s oil sale to zero, is a victory for us.”
The Indian context
India has a long and proud history of independent foreign policy. Lately, it has reiterated that unilateral sanctions by any country will not be adhered to and only UN sanctions will be considered. Iran has long been an energy supplier to India and the sanctions mean that Iran will have to possibly accept payment in Rupees whether it likes it or not. A payment made in Rupees is beneficial for India, especially considering the weak Rupee v/s Dollar rate. Reportedly, India has marginally reduced its oil import order from Iran, but complex negotiations will have to be held between the stakeholders before any concrete policy decision can be made. However, the USA under Trump has been increasingly making unilateral decisions. These unilateral decisions bring with them ambiguity and if on similar lines, Trump decides to remove the waiver granted to India, then there is a possibility of a large-scale diplomatic fallout.