US decision to end Iran oil sanctions waiver won’t not affect India’s investments in Chabahar port | India News

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US’ decision to end the Iran oil sanctions waiver will not affect India’s investments in Chabahar port in Iran. The revocation of the “significant reductions exemption” (SRE) which allowed eight countries, including India, to continue to source Iranian oil for the past six months ends on May 2, following which the US expects oil imports from Iran to go down to zero.
While India may have been insulated on the Chabahar front, its current plan on using a rupee payment account for Iran’s oil may be in danger. India has been paying for a large percentage of its oil imports through a rupee mechanism that is deposited in an escrow account in an Indian bank. Iran uses that money to buy essential items like food stuff, medicines etc from India. After May 2, US has told India it would not allow India to add to the corpus, although Iran would be able to continue to use whatever is left in the account. Indian officials say there is little “clarity” on the matter.
Reacting to US secretary of state Mike Pompeo‘s announcement on Monday stating that there would be no more “waivers”, the MEA spokesperson said in an anodyne statement, “We are adequately prepared to deal with the impact of this decision. .. Government will continue to work with partner nations, including with the US, to find all possible ways to protect India’s energy and economic security interests.” The Chinese foreign ministry took a sharper stand, saying China “consistently opposes US unilateral sanctions.”
US officials have been careful to show they are trying to ensure market stability (although crude prices are at a six month high after Monday’s announcement) and they want to “partner” with allies as they move to a zero Iranian oil state. Pompeo’s announcement clarified there would be no more waivers.
The UAE and Saudi Arabia have told the Indian government that they would ensure adequate supply of oil to meet India’s needs. The US too intends to step up its oil exports, though its pipeline infrastructure needs to be augmented. Under the waiver, India was reportedly allowed to import 300,000 bpd. India will suffer quite a bit, because its refiners, say officials, are configured for the particular variety of Iranian crude.
The “maximum pressure on Iran”, sources said, would only ease if Iran agreed to renegotiate the nuclear deal. Some people familiar with developments have said recent reports of Hezbollah fighters facing salary cuts and other reports of reduction of weapons to other groups controlled by Iran is testament to the success of the US strategy. About 1.5 million barrels of Iranian oil is off the markets at present.
India is taking a milder stand to the US possibly because the US has walked the extra mile to accommodate India’s terror concerns vis-a-vis Pakistan. According to sources, Washington is piling on the pressure to get a terrorist designation of Masood Azhar, which basically needs a nod from Beijing. US investigators, sources said, are helping India piece together the background of the Pulwama terror attack. India and US are working together on terror designations, counter-terrorism initiatives, as well as training Indian officials. At the FATF, the international attempt to hold Pakistan’s feet to the fire is being pushed by the US, and India.
While not explicity stated, India will be expected to toe the US line on Iran – the idea being, India’s terror concerns are important to the US, the opposite must also be true.
If India violates the sanctions and continues to buy oil from Iran, India risks inviting “secondary sanctions” on Indian companies and entities. Sources said these would include a ban on using the international SWIFT system, forfeiting dollar assets as well as any assets in the US. Most Indian companies have refrained from engaging with Iran.
For those looking for US alternatives, there is always the European SPV, Instex, set up for the purpose. But it is yet to take off, given that it is mainly a barter system between European companies and Iranian ones. India and EU tried to collaborate on this, but it hasn’t gone far.
At this moment, despite Iran, Venezuela and most of Libya not being in the international oil market, oil prices are hovering around the $70 mark. If prices rise significantly, its not clear how India will deal with the situation then.
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