Bikky Khosla | 30 Apr, 2019
US President Donald Trump has ended the waiver allowed to
certain countries including India to buy Iranian oil and threatened sanctions
if the embargo is not complied with. According to a recent White House
announcement, countries that were granted import exemptions after the November
2018 sanctions would have to cease purchases of Iranian oil until May 2. The
development came as bad news for India, which depends on Iran for nearly 10
percent of its oil requirements.
Among the other countries -- China, Turkey, Japan, South
Korea, Italy, Greece, and Taiwan -- that
were granted the six-month grace period, only the last three have halted their
purchases of Iranian oil. There is little chance that the US will allow continuation
of the Significant Reduction Exemption after the May-deadline, but at the same
time Washington is also facing the awkward choice of backing down from its
threats or executing sanctions, which may alienate allies like India, Japan and
South Korea and exacerbate tensions with China.
As far as Indiaâs interests are concerned, the effects of
the US waiver withdrawal may be cascading. India depends heavily on Iranian
oil, and if it complies with the US embargo, the challenge will be to find
alternative suppliers which will provide crude oil at the same competitive
prices. If our oil import bill rises, it will tend to pressure the trade
deficit and current account deficit, and the rupee will be impacted. Higher
inflation may also force the RBI to go for monetary tightening in future.
The government has, however, claimed that it is
"adequately prepared" to deal with the impact, adding that it will
continue to find "all possible ways" to protect its energy and
economic security interests. According to the Petroleum Ministry, the
government has already "put in place a robust plan" to ensure
adequate supply of crude oil to Indian oil refineries. It will be interesting
to see how the Centre faces this challenge in the coming days.
I invite your opinions.