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 India’s 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.