New Delhi: Even as China and Turkey expressed defiance, India on Tuesday indicated that it would bring down Iranian oil imports to zero and was “adequately prepared” for the end of US waiver on May 2.
Meanwhile, sources close to negotiations between India and US drew a link between Washington’s efforts to stop Iran’s “terror activities” and the pro-active steps taken at United Nations Security Council to list Masood Azhar, chief of Pakistan-based Jaish-e-Mohammed (JeM).
The manner in which the US is linking the ‘assistance’ it is providing India on the UN sanctions list front to India backing down on its earlier insistence on continuing to purchase Iranian oil is likely to trigger a debate on the utility of the Modi government’s approach to the issue. Ending Iranian imports will impose a definite cost on the Indian economy while any benefit from forward movement at the UN Security Council on Masood Azhar would at best be symbolic. Lashkar-e-Tayyaba chief Hafiz Saeed has been on the UN terror sanctions list for years without it restraining him in any way.
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The US, along with France and UK, are currently pushing China to remove its hold on Azhar’s listing with the UNSC 1267 committee or they plan to introduce a resolution to force Beijing to publicly wield its veto for a terrorist. This is a top priority item for the Indian government, especially after Pulwama suicide bomb attack in February. An international action against Masood Azhar would certainly be a feather in the cap of the government, which has made combating terrorism as its top re-election campaign plank.
Sources noted that US wants to support India’s to dismantle terror infrastructure in Pakistan, they would also want to remove Iran’s influence through proxy groups in west Asia.
On Monday morning, Washington announced that President Donald Trump had decided not to renew oil waivers, known as “Significant Reduction Exceptions”, given to China, India, Japan, South Korea and Turkey. This would mean that the US will start imposing sanctions against countries which continue to import oil from Iran after the expiry of the waiver on May 2.
According to sources, the exemption given to India for development of Iran’s strategic Chabahar port remains.
The first official reaction was from petroleum minister Dharmendra Pradhan, who tweeted that the government has “put in place a robust plan for adequate supply of crude oil to Indian refineries”.
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“There will be additional supplies from other major oil producing countries. Indian refineries are fully prepared to meet the national demand for petrol, diesel & other Petroleum products,” he wrote.
Ministry of external affairs spokesperson Raveesh Kumar also reiterated that India was “adequately prepared to deal with the impact of this decision”.
Taking a neutral tone, Kumar did not express any disappointment, but merely “noted” the discontinuation of SREs to all oil importers from Iran.
“Government will continue to work with partner nations, including with the US, to find all possible ways to protect India’s energy and economic security interests,” he said.
Turkey, China say US undermining regional stability
The Indian reaction is in marked contrast to the statements other major importers of Chinese crude have issued.
“We do not accept unilateral sanctions and impositions on the issue of how we will establish relations with our neighbours,” foreign minister Mevlut Cavusoglu was quoted as saying by the state-run Anadolu news agency on Monday. The minister also took to Twitter with a sharply worded comment:
The #US decision to end sanctions waivers on #Iran oil imports will not serve regional peace and stability, yet will harm Iranian people. #Turkey rejects unilateral sanctions and impositions on how to conduct relations with neighbors. @StateDept @SecPompeo
— Mevlüt Çavuşoğlu (@MevlutCavusoglu) April 22, 2019
In Beijing, Chinese foreign ministry spokesperson Geng Shuang said that “China consistently opposes US unilateral sanctions”. “The Chinese government is committed to protecting the legitimate rights and interests of Chinese enterprises,” he asserted, adding that US action will create turmoil in Middle-east and international energy market.
In official statements, India did not explicitly state that it would be stop all oil imports from Iran, but the implications were clear.
“Until the waivers are not restored back, I don’t think India can buy oil from Iran. We will stop importing oil from Iran,” a top Indian government official told PTI.
India is the world’s third-biggest oil consumer and meets more than 80% of its oil needs through imports. In 2017-18, Iran was India’s third-largest supplier after Iraq and Saudi Arabia, meeting about 10% of its demand.
While announcing that no waivers will be renewed, the US said that the UAE and Saudi Arabia would be able to pump in more oil into the world market to maintain economic stability.
Meanwhile, the price of Brent crude rose up 0.4% to $74.33 a barrel on London’s Intercontinental Exchange .
When Trump first pulled out of the nuclear deal, oil shot up to over $85 a barrel and it fell to near $50 after the US administration unexpectedly granted the waivers.
Sources indicated that there was no more scope for negotiations for a ‘grace period’ and May 2 was a definitive full stop on Iran’s oil trade.
India had been hoping to convince the US to give it some more time, pointing out that it had already decreased imports from Iran. New Delhi had also argued that stopping Iran oil imports in the middle of an election season may not be feasible. But, the US did not buy it, as oil imports are commercial decisions made by state-owned companies.
Sources pointed out that Washington did not feel that it would also have major impact on India’s relations with Iran – since New Delhi could take the line that there was not much choice.
Rupee escrow accounts held by Iranian banks in India’s UCO bank will also cease to be functional from May 2.
Other importers hedge bets
Japan’s ministry of economy, trade and industry (METI) said that there would not be much impact from the US decision on its crude imports. The head of METI, Hiroshige Seko told reporters that due to a conscious decision to reduce reliance, Iranian crude accounted for just about 3% of oil imports.
Meanwhile, South Korea has not yet taken a ‘no’ from US. Reuters reported that a South Korean delegation will be travelling to US to “try to see if we can persuade the U.S. government to extend waivers”.
Taiwan, Greece and Italy had also been among the eight economies who got the waiver last year, but they never utilised it.