Oil on our terms

Finally the US sanction against Iran has been enforced, which is expected to severely hit Tehran’s oil exports, shipping and banking sectors. US  Secretary of State Mike Pompeo dubbed it the toughest sanctions-ever against Iran by the US. Countries that will face the collateral damage are those with a civilisational relationship with Tehran. India is one among them as it is the second-biggest importer of Iranian crude after China. Iran reliably supplies more than one quarter of India’s total crude imports from the Gulf, with three distinct advantages — excellent quality, substantial discount and extremely liberal payment terms.

Credit goes to the diplomatic efforts of the Narendra Modi-led government, which has, for the time being, successfully averted a crisis. It has been negotiating with the US authorities since May 2018 when the Trump government walked out of the Joint Comprehensive Plan of Action with Iran and decided to reimpose sanctions against the entities engaged with Iran, including countries importing Iranian crude. Earlier this month, the US relaxed the restrictions by allowing eight countries to import Iranian crude that included India. The exemption is, however, temporary and is reportedly expected to last till May 2019. Despite its provisional nature, the breather is crucial for the ruling BJP because any disruption in energy supply could have further spiked domestic petrol and diesel rates and spoiled its poll prospects ahead of the 2019 General Election.

Fortunately, after touching astronomical  height, global crude oil prices are showing signs of softening. The Indian currency has also perked up after the supply uncertainty waned. This situation could have been different had New Delhi buckled under American pressure and dumped its old allies such as Iran and Russia. The greater constructive engagement with China and PM Modi’s recent visit to Japan also created a conducive diplomatic environment for India, which is the third largest energy importer after the US and China, and one notch ahead of Japan. India must not succumb to US pressure as it only follows UN sanctions.