The upcoming termination of waivers on Iranian oil imports by the United States from May 1, 2019, will impact eight countries, including India. These countries will no longer be able to import cheaper Iranian oil without attracting US sanctions. This policy shift is linked to a number of geopolitical and strategic factors, which merit examination.
US Sanctions on Iran: Background and Rationale
In 2015, P5+1 countries – America, Russia, the UK, China ,France and Germany – reached an agreement with Iran, lifting economic sanctions provided that Tehran agreed to relinquish a significant portion of its nuclear programme and submit to regular, invasive inspections. The US, however, under the Trump administration, argues that the nuclear agreement did not deter Iran from pursuing nuclear weapons, necessitating the imposition of permanent restrictions as stipulated in the accord. The US further wants Iran to halt its ballistic missile development and end support to militant groups in regions like Lebanon, Syria, Yemen, and others, which it regards as terrorist organizations. Consequently, any country that imports Iranian oil or engages in banking transactions with Iran would incur American sanctions.
The Importance of Iranian Oil to India
India, being the world’s third largest oil importer, relies heavily on Iranian oil supplies. In the fiscal year 2018-19, India imported 23.5 million tonnes of oil from Iran alone. Iran, as India’s third largest supplier, offers several benefits such as a 60-day credit, free insurance, free on board basis (FOB) and a barter-of-goods arrangement.
Strategic Interests: Why India Wants to Continue Buying Iranian Oil
Beyond the economic considerations, there are robust strategic reasons behind India’s preference for Iranian oil. India perceives Shia Iran as a potential ally against Sunni-majority Pakistan. Iran’s strategic location and the common Indian-Iranian interest in countering Pakistan’s influence in Afghanistan also work in its favor. Furthermore, India views Iran as a channel to Central Asia, a region deemed strategically critical by New Delhi. India’s investment in Iran’s Chabahar port and highways that offer an alternative route to Afghanistan and Central Asia, bypassing Pakistan, underscore Iran’s long-term importance for India.
| Fact | Detail |
|---|---|
| India’s Position | World’s third largest oil importer |
| Iran’s Output to India (2018-19) | 23.5 million tonnes |
| Alternatives for India | Saudi Arabia, UAE, the US |
Alternatives to Iranian Oil
India does have other sources of oil – primarily Saudi Arabia, the UAE, and the USA – which could replace Iran. Additionally, the recent discovery of a large oil field in Guyana offers another potential source.
Indian Interest in Guyana Oil Fields
India is reportedly keen on harnessing the oil fields in Guyana, one of the world’s largest in recent times. ExxonMobil, a leading global energy firm, has announced an estimated reserve of more than five billion oil-equivalent barrels in the offshore Stabroek block in Guyana, which shares borders with Venezuela, another country with one of the world’s biggest oil reserves. India is considering farm-in opportunities in Guyana, wherein an energy firm acquires a stake in a discovered or producing field, owned by another firm.
Shifts in India’s Allies and Partnerships
India has been investing more in relationships with Saudi Arabia and other anti-Iranian Gulf monarchies. This could pressure India to moderate its support for Iran. Growing ties with Israel, a crucial supplier of military equipment for India, along with a shift towards alignment with the US also impact India’s stance on Iran. Iran’s stance on several issues critical to India has also raised concerns in New Delhi, pushing it to reconsider its reliance on Iranian oil.
