Prepare for the Iranian crude waiver to end

The United States (US) has decided not to grant an extension to any country for importing Iranian crude from May 2. In November, the US had allowed eight countries to continue importing oil from Iran albeit in significantly reduced quantities. India was among the eight countries to have been granted the waiver. Three of the eight countries (Greece, Italy and Taiwan) have already brought their imports to zero. Among the rest, Japan and South Korea don’t rely much on Iranian crude. This leaves India, China and Turkey as the problem cases.

New Delhi has still not given up hope. The government is hoping that the reduction to zero will not be imposed all of a sudden. After all, Iran was India’s second largest oil exporter as recently as Q1FY19. The recent spike in crude prices are adding to the worries. But India has the experience of significantly reducing Iranian crude imports in the run up to 2015 Iran nuclear deal. However, the imports never went to zero, which is what the US seems to be demanding now. This will be new territory. Some European nations are trying to find a way to continue doing business with Iran but haven’t encountered much success. Most European companies would any day prefer keeping their access to American markets and financial system over whatever revenues they make out of Iran. India should be pragmatic enough to realise that Iranian crude is not worth risking the bilateral relationship with the US.

Oil, however, is just one part of the story. These stringent sanctions could also presage some deeper changes in the power balance of the region as well as internally in Iran. The Arab countries are bound to get stronger vis-à-vis the Iran-Syria axis. Despite all the rhetoric of civilisational ties with Iran, India’s economic interests, too, are much deeper with the Arab states. And within Iran, economic hardship might weaken the moderate forces and catapult hardliners to power. India should be prepared for such power shifts in the region.

First Published: Apr 23, 2019 17:42 IST