India’s Reactions on Import ban on Iranian oil 25/04/2019 – Posted in: Daily News

India’s Reactions on Import ban on Iranian oil

For: Preliminary; Mains: GS II
Topics covered: International Relations, India’s new strategy, Oil imports

 

News Flash

USA have taken back the exemptions given to India and other countries to import Iranian oil. The Indian government has indicated it will ‘zero out’ oil imports after the May 2 deadline. Government’s focus is now on finding alternative sources of energy, and minimising the impact on the Indian market.

India was importing about 10% of its oil needs from Iran, although it had considerably reduced its intake over the last few months.

Indian importers, including the oil PSUs, have decided that sourcing oil from Iran is unviable at present.

Background

In late 2018, America granted waivers to eight countries including India for importing oil from Iran till March 2019. India lobbied for such an exemption as Iran is India’s oil provider or supplier. India and Iran are already working on a Preferential Trade Agreement (PTA) that would reduce tariffs on 80 to 100 products.

 

What negative impacts it can have?

  • The price of oil has already shot up above the $70 mark in April. US- Iran tensions will increase it more and it will have negative impacts on India.
  • Iran has threatened to shut down the Strait of Hormuz, a key channel for global oil shipments, which would further lead to inflationary trends, not just for oil but other commodities too.
  • Uncertainty on the investments in the Chabahar port, which India is building as an alternative route for trade to Central Asia.
  • India isn’t just testing its traditional ties with Iran, but also giving in to President Donald Trump’s blatant bullying after his administration withdrew from the Iran nuclear deal.

 

India, China, the EU and other affected entities could have spent their time more productively in building a counter with an alternative financial architecture, immune to the U.S.’s arbitrary moves.

 

India’s importance for Iran

Iran is the third largest supplier of crude oil to India after Iraq and Saudi Arabia, supplying more than 425,000 barrels of oil per day, and consequently India is one of the largest foreign investors in Iran’s oil and gas industry.

 

Source: The Hindu