The Modi government has caved in, in the face of threats of US sanctions regarding oil imports from Iran. At first glance, this would seem improbable, given the way the government is trying to project the temporary waiver from sanctions given to India and seven other countries.
However, the picture becomes clear when the statements made by the US Secretary of State, Mike Pompeo, on the imposition of sanctions on Iran are analysed.
The United States has re-imposed sanctions on Iran from November 5 on its oil trade, shipping and banking. Anyone entering into trade and business activities in these sectors with Iran are also liable to be sanctioned. The United States has taken this arbitrary step after announcing withdrawal from the nuclear agreement with Iran in May this year. At that time, the US administration had announced that sanctions on oil exports would be imposed in six months’ time.
The agreement with Iran to cap its capacity for nuclear arms development called the Joint Comprehensive Plan of Action (JCPOA) had been arrived at between Iran and six other countries, viz., the United States, Germany, France, UK, Russia and China. None of the other partners agree with US decision. They have stated that Iran has been compliant with the terms of the agreement and therefore the US withdrawal from the JCPOA is unwarranted. All of them maintain that they will continue to trade with Iran.
India is the second largest recipient of oil from Iran after China. At present, Iran is the third largest supplier of oil to India. In the past six months, in preparation for the sanctions to be imposed, the US has been negotiating with India to cut oil imports from Iran.
During the 2+2 ministerial level talks in September, apparently an understanding was arrived at, whereby India would take steps to reduce oil imports from Iran substantially. In turn, the US would give a waiver to India to continue the import of Iranian oil in progressively lesser quantities for six months. The US would continue to exercise pressure on India to go towards zero imports over a period of time.
That this is what transpired is now confirmed by the statement made by Mike Pompeo on November 2, on the eve of the sanctions on Iran being imposed. He stated that some “temporary allotments to eight jurisdictions” are being given. He, however, added “but only because they have demonstrated significant reductions in their crude oil and cooperation on many other fronts”.
India has “demonstrated” significant reductions in its crude oil imports from Iran. It has dropped from 690,000 barrels per day in May 2018 to around 400,000 barrels per day in August this year (just before the 2+2 meeting).
In 2017-18, India imported 22.6 million tonnes of oil from Iran. It is reported that the US is demanding that India restrict its yearly purchase to 15 million tonnes a year which would amount to only 300,000 barrels a day.
President Trump has made it clear that they have not demanded zero oil imports from Iran at one go as this would have led to “oil shock”. If all Iranian oil is withdrawn from the market, it would lead to a huge increase in oil prices which would be a shock to the global economy.
India is, thus, being given time to phase out its oil imports from Iran in a calibrated fashion. This is going to cost India heavily. The oil import bill for the current financial year, 2018-19, is expected to rise to $125 billion, i.e., by 42 per cent. This is happening due to the rise in global oil prices and the depreciation in the value of the rupee. With major cuts in the cheaper oil imports from Iran, the overall oil import bill is bound to rise further with its consequent adverse effect for the economy.
The giving in to US pressure, which harms India’s interests, is now being projected as an achievement. The minister of petroleum and gas, Dharmendra Pradhan, told reporters on November 3 that the “prime minister’s forceful campaign has been that you cannot ignore interests of consuming countries. Understanding the geo-political situation, India has been able to get its way. The US has given waiver to some countries including India.” This is just whitewashing the truth.
At the time when the US announced its intention to impose sanctions on Iran, the external affairs minister, Sushma Swaraj, had declared that India will abide only by United Nations sanctions and not of any one country. From then, to pleading for a waiver by accepting US terms to reduce oil imports from Iran by a third before sanctions came into place on November 5, reveals a steady succumbing to US pressure.
Even this temporary waiver has come at a higher price because, according to Pompeo’s statement, “we demanded much more serious concessions from these jurisdictions before agreeing to allow them to temporarily continue to import Iranian crude oil.” We are yet to know what are the serious concessions conceded by the Indian government.
The other waiver given for India’s investment in the Chabahar port in Iran is also motivated by America’s interest in getting greater Indian involvement in Afghanistan as the port will give India access to Afghanistan bypassing Pakistan.
There was no need for India to cravenly accept the US sanctions on Iran. First of all, unlike the earlier UN sanctions, it has been unilaterally imposed by the United States. Even its allies UK, France and Germany, who were co-signatories to the JCPOA, have refused to accept the sanctions. The other two signatories – Russia and China – are firmly opposed to the sanctions.
A joint statement issued by the foreign and finance ministers of France, UK, Germany and European Union on November 2 expressed their commitment to work for the “preservation and maintenance of effective financial channels with Iran and the continuation of Iran’s export of oil and gas”. They also stated that they would work with Russia and China as participants to the JCPOA and with third countries interested in supporting the JCPOA.
Unlike India, China has denounced the new US sanctions. The official spokesman for the Chinese government declared that China opposes the unilateral sanctions and reiterated China’s “normal cooperation” with Iran. Thus, if India had wanted, it could have cooperated with all these major countries in order to ensure that its oil trade with Iran and other business investments could be carried on. This would have been the way to protect India’s national interests.
But India is locked into a strategic embrace with the United States due to the Modi government’s eagerness to be a subordinate ally. To defy the United States sanctions and preserve its strategic autonomy would require a break from this strategic alliance – something which the Modi regime cannot even contemplate.