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Collateral damage

Collateral damage

As US President Donald Trump swung the baton, announcing the decision to ban all Iranian oil purchases after May 1, waivers to eight customer nations cease today. Although Trump has been eyeing to completely cease Iranian oil exports since he slapped Iran with sanctions last November, his baby steps towards the same were due to apprehensions of a global rise in oil prices. Providing waivers to allies and partner nations were a result of his apprehensions. However, when the US announced a complete ban, it was understood that Trump's administration had convinced the president that the rising US oil production will ensure adequate supply to global markets and abstain global prices from surging. With his apprehensions allayed, there had to be no more discussion in passing the long-term objective of bringing Iran's oil export down to zero. And, the timing of the same matches the deadline of the 180-day initial waiver provided to allies – May 1. Trump's concern regarding a surge in global oil prices had urged him to ask members of the Organisation of the Petroleum Exporting Countries (OPEC) to increase oil output in order to compensate for losses from Iran and Venezuela – both handed US sanctions. With assurances of a well-supplied oil market from Saudi and Emirati leaders, US's unilateral pillorying of Iran and Venezuela became an obstacle-less venture. US' decision primarily comes in the light of Iran's continued nuclear transgressions. That said, the Iranian support towards Shia-dominated states from Lebanon to Yemen is also a cause of upset in the fray. Because of Iran's support, Saudis and Emiratis have been unable to force the Houthis in northern Yemen to sue for peace. The result is a military stalemate not allowing Saudi military to restore the internationally recognised Yemeni government to power. Secondly, the unwelcome ascendence of Russia in West Asian affairs following a meeting of the presidents of Russia, Turkey, and Iran in February at Sochi to discuss the Syria. The US withdrawal from Joint Comprehensive Plan of Action (commonly known as Iran Nuclear Deal) – aimed at preventing Iran from acquiring a Nuclear Bomb – had brought Iran's proxy war in the middle east and its development of Ballistic missiles in the fray. Even if the US has its reasons in place to subjugate Iran's financial lifeline, ramifications of the same reaching Indian shores has been a matter of concern for India. For India, Iran is the third largest supplier of crude oil after Iraq and Saudi Arabia. US's sanctions have given India a double blow since sanctions are in place for its other top supplier, Venezuela as well. Indian refiners prefer the heavy sweet crude supplied by Iran and Venezuela, which helps them produce low-sulphur fuel oil. Despite sanctions in place, India till now had been able to import considerable quantity from Iran owing to the sanction waiver by the US which allowed Iran to ship 6.24 per cent more oil in 2018-19. However, imports from Venezuela dropped 5.56 per cent in the last fiscal compared to 17-18. This signifies India's attempt to accommodate alternatives to Iran and Venezuela in the wake of sanctions card being played by the US. Sanctions also aided the US in proliferating its oil export to India by 328 per cent in the last fiscal to 6 MT in 2018-19 from 1.4 MT in 2017-18. This brought the US at ninth position in the top ten oil exporters to India. What majorly concerns Indian refineries is not the availability of crude oil but the distance of the shipment which increases freight cost, making oil purchase expensive. Since Iranian oil accounts to only 10 per cent of total import (Iraq and then Saudi contributing more to India's oil requirement) the absence of Iranian import should not make much difference. What then concerns India more is the impact of sanctions and its requisite compliance on its development and use of the Iranian port of Chabahar aimed at facilitating alternate connectivity for Afghanistan, bypassing Pakistan. Moreover, US sanctions render Tehran unable to sell fertilisers directly to India but only through intermediaries, making Indian farmers pay 38 per cent more for Iranian fertiliser and thus impacting the agricultural sector as well. US sanctions on Iran and Venezuela, in a way, is perceived as collateral damage for India who yesterday tried to convince the US of a second waiver by highlighting how vast use of Iranian crude cannot be replaced overnight. Several oil refineries are calibrated to process Iranian crude and re-calibrating them is not possible in such a short period. Though a second waiver is a purely US dependent privilege, India must strengthen its alternative sources to replace Iranian crude import otherwise the impact thereafter would severely affect oil prices, impacting the common man. A second thought also surfaces regarding the whole compliance to US's interests argument is the fact that the US hegemony has yet again harmed Indian interest, restricting its choices. The next government must tend to the diverging international relations while establishing a strong stance on our interests which will hold significant weight due to India's strategic importance in the Indo-Pacific corridor and also as an appropriate challenger to China in the region.

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