India has bought some time on volume of imports from Iran but is caught between it and the US

Iran’s Foreign Minister Mohammad Javad Zarif may have looked for some middle ground on India’s oil purchases from his country despite US sanctions but we are in no position to commit. Although External Affairs Minister Sushma Swaraj conveniently bought some time, saying a decision would be taken by the new government, fact is the oil crisis is staring at us. And we are yet to draw up a strategy to counter the Trump administration’s decision to cancel waivers from Iran sanctions to countries doing business with it. Given the volume of trade, not one but a multi-pronged solution is the need of the hour. India imports over three-quarters of the oil it consumes, much of it from Iran, even after decreasing its imports from that country. India was the second biggest buyer of Iranian crude oil after China. Which is why Zarif, by reiterating that India was a key strategic partner for his country, hoped that we would give a commitment on continuing to source at least a small part of our oil imports. We may not have committed to zero import but the fact is we have to factor the worst possibility considering even marginal business could bring our banking, insurance and shipping sectors under sanction. Besides, India would have to demonstrably humour the US in return for its strategic support during the Balakot airstrikes and the UN listing of Masood Azhar as a global terrorist. The US is already cornering us on trade tariffs, though not as bludgeoningly as it does with China.

Keeping both sides happy while getting a practicable deal is a tough sell. Workarounds like the one many European nations have proposed of a barter arrangement that doesn’t involve dollar payments or making payment in rupees via escrow accounts are on the table. The US, meanwhile, has upped the ante saying it can’t ensure the sale of its oil to India at cheaper rates as the commodity is controlled by private companies. This will have a cascading effect on the oil bill as Iran was giving us a discount. And though the US has assured that it is working with countries like Saudi Arabia and United Arab Emirates (UAE) as alternate supply sources for affected countries,  there is no guarantee that those deals will come with the same benefits. Of course, both Saudi Arabia and UAE have warmed up to India significantly now and could accommodate some of our interests. However, following the attacks on Saudi oil carriers and the US implying Tehran’s hand in them, a confrontational scenario is rapidly building up in the Middle East which could impact prices. Securing ties with Iran vis-a-vis the US is a delicate issue though India has walked that path already, managing to get the Chabahar port project outside the purview of sanctions. But now it needs to fork out a solution where it doesn’t look like giving in to the Americans or alienating friendly Iranians. That tightrope walk is an unenviable task but one that will test our new leadership.