Iran Sanctions: Test of Strategic Autonomy for India and the Rest
The United States announced discontinuing the Significant Reduction Exemption to all purchasers of crude oil from Iran commonly known as waivers.
The Ministry of External Affairs Official Spokesperson said, “Government has noted the announcement by the US Government to discontinue the Significant Reduction Exemption to all purchasers of crude oil from Iran. We are adequately prepared to deal with the impact of this decision. Ministry of Petroleum and Natural Gas has already issued a statement in this regard. Government will continue to work with partner nations, including with the US, to find all possible ways to protect India’s legitimate energy and economic security interests.”
In tandem the Ministry of Petroleum and Natural Gas on the announcement by US to discontinue the Significant Reduction Exemption to all purchases of crude oil from Iran said, “The Government of India has put in place a robust plan to ensure that there is adequate supply of crude oil to Indian oil refineries from May 2019 onwards. There will be additional supplies from other major oil producing countries from different parts of the world. The Indian refineries are fully prepared without any problem to meet the national demand for petrol, diesel and other petroleum products in the country.”
These developments come after in May last year the Trump administration in United States pulled out from the nuclear deal with Iran which was the handiwork of the EU 3 + 3 that is the European Union France, Germany and UK on one hand and the US, Russia and China, thus including all permanent members of the UN Security Council.
India had supported the nuclear deal that was inked in 2015 and had benefitted from opening of the oil markets by Iran to the extent that Iran, is India’s third largest supplier of oil after Iraq and Saudi Arabia.
The US government placed countries drawing oil and gas from Iran on six months notice in November to reduce the imports with the objective of placing curbs on Iran’s income after imposition of sanctions on the country. Known as Significant Reduction Exemption the waiver was expected to be extended.
Thus India apart from seven other countries including US treaty allies South Korea and Japan who had Iran as a principal source of supply were shocked by the decision that came that the U S will not be extending the waiver that has been granted to imports of oil from Iran.
The normal course has been to extend 20 % limits each time with a view to gradually decrease import of oil from Iran by those dependent on it so that the overall oil prices remained stable and economies of allies and partners such as India were not impacted. But the Trump administration known for following bold and some would say rash decisions has decided against gradualism and is gone in for a drastic cut all in one go.
The challenge from the US withdrawal of waiver for importing oil from Iran will have to be met on multiple fronts by countries as India. The first is to manage energy security and the government is confident that with additional production by countries as Saudi Arabia and possibly also by the United States apart from other suppliers as Nigeria there could be a reduced impact.
The government had started planning reduction of oil imports from Iran as early as in June 2018, but was hopeful of waivers which are not forthcoming now thus alternates will have to be realistically thought of.
The Petroleum Ministry has in a statement indicated that contingency plans are ready and it would be able to ensure that supplies were not disrupted and prices of petrol and diesel the common fuel used by the public will remain stable. This is important as the election campaigning is in full swing. For India and Iran the one compensation is that Chabahar port project, being developed by India in Iran, will not be impacted by US President Donald Trump’s decision not to renew exemptions that let eight countries.
On the other hand there are concerns of not coping with the US demand which may result in a backlash by the Trump administration which is now demanding its pound of flesh so to say for supporting India after the Pulwama attack and the Balakote operations.
While New Delhi says it does not recognise unilateral restrictions imposed by a state entity and follows only United Nations sanctions, strong US pressure will force the government to take pragmatic measures. The U.S. has made the demand quoting support to India during the Indo Pakistan confrontation establishing India’s rights for retaliation after the Pulwama terror attack.
The United States has also supported India’ ASAT test in March. Now that the United States is recalling these instances of support, it is unlikely that India will resist bringing into question the degree of strategic autonomy that countries enjoy in uni-polar environment under the Trump administration.