SSB Lecturette Series: The Tale of LOW DOWN of India Iran Oil trade

India, world’s seventh largest country has its own energy needs. According to World Bank India’s economy is going to increase at the rate of 7% to 8% in the coming years and recently Indian economy has surpassed France economy and has taken the 6^th spot in the world. 

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For growth India needs energy. And the energy requirement must be fulfilled. India unlike Arab nations is not having much reserve of oil so it imports oil for its energy requirement. Iran is the most important partner for oil export to India after Iraq and Saudi Arabia. Last year Iran exported 27 million ton of oil to India .After china India is the second largest importer of oil from Iran. As, US has pulled out itself from the nuclear deal with Iran it has imposed sanctions on Iran and to isolate Iran from the world it has given Nov 4 deadline to eliminate the oil import to zero. For India there are two conditions:

1.       If it goes against US, it may face sanctions and also it may have impact on the relations of both countries as, both nations are working to improve their defense and security ties. 

2.       If India goes against Iran, it may lose its long time friend, access to Chababar port and access to International North south Transport Corridor and also the international reputation of India for protecting its sovereignty.

In 2012 when US was forcing Iran to sign the Joint comprehensive agreement of Cooperation, similar sanctions were imposed on Iran and tough signals were given to India to reduce its oil imports. Under the regular pressure India reduced its oil import to 15% from Iran but also invented the new Rupee to Rial conversion method of payment through UCO bank .According to this Iran was able to import things from India by paying in rupee. And after reducing the oil imports PM Manmohan singh visited the Iran for NAM (Non alignment movement summit) besides the US pressure.

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But 2018 is not 2012 this time US and India’s relations are under strain ,recently US has postponed the 2+2 talks with India for improving defense and security relations  due to India’s interest in Russia S 400 missile system. If India goes against US sanctions, Indians companies may feel the adversities. US sanctions will make it hard for refiners, insures and transporters to operate. Just four month ago New Delhi had red carpet welcome for Iranian President and committed to increase oil imports by 25%.Negotitations done for improving India’s bid for farzad b gas block

1. India has invested 500 million dollar to build berths at chabahar port for better connectivity to Afghanistan bypassing Pakistan

2. India is developing a rail link to connect Zaheden province with Afghanistan with the investment of 2billion dollars in order to avoid the trade restrictions with Pakistan and to reach turkey and other nations.

In the next month one can expect tough negotiations between New Delhi and Washington. A US team is going to visit India this month and a senior official  has ruled out “waiver or license” to any country he did hold out hope that some flexibility might be negotiable “case by case” for countries that agree to reduce oil intake from Iran. While Indian oil supplies are diversified, it options in this game of diplomatic brinkmanship are narrowing.

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Let’s see what happens and how Delhi negotiates in this tough situation. This is what politics and playing once Ace is all about. Share your views on this situation as a young upcoming leader and see where the things go!! Keep reading SSB Vision for more information.

About the Author: Deepak Manhas is from Pathankot Punjab. Presently working in automobile industry as an Engineer. His aim is to join armed forces and nowdays preparing for it with full enthusiasm and confidence