High-stakes Game for India as US Ends Waivers on Imports of Iranian Oil

New Delhi: The US government on Monday announced its decision not to renew any waivers granted last year to buyers of Iranian oil. The waivers on imports expires on May 2.

India, the second biggest buyer of Iranian crude oil, is bound to be affected by the decision, which aims to raze Iran’s oil exports to almost zero.

The decision is less surprising when taken into account the Trump administration’s pullout of the Obama-era Iran nuclear deal last year. Trump vowed to put sanctions on Iran days after he withdrew from the deal. The US demanded that buyers of Iranian oil to stop purchases by May 1 or face sanctions, ending six months of waivers which had allowed Iran's eight biggest buyers, most of them in Asia, to continue to import limited volumes.

Now that the US has made it clear that it has no plans of extending the waiver, oil imports from Iran are likely to take a hit, if not completely end. A hit to Iran’s oil exports would mean an increase in global prices and there is no way India can be away from that effect.

Less Oil For India?

Interestingly, despite the waiver on sanctions in November, India continued to buy oil from Iran. In March this year, reports cited that India’s imports rose to 405,000 barrels per day. While it was a more than 50 per cent increase than February, it was still far less than what it was in March last year.

The government, however, has maintained that the only sanctions it will abide by would have to come from the United Nations.

The US has made consistent efforts to convince India to reduce or end oil imports from Iran. Former US Ambassador to the UN, Nikki Haley, during her meeting with Prime Minister Narendra Modi in India, had reiterated that it was important for the country to cut down on oil imports from Iran.

On Monday, sources said that the government had seen the announcement made by the US and it was studying the implications of the same.

Strategical Disadvantage?

Beyond the oil import issue lies the issue of Chabahar port. India has committed millions of dollars in building the port that connects India and Afghanistan. The port is considered an important gateway for India into Central Asia. India officially took over the functioning of the strategic port in December last year. While, in February this year, Afghanistan sent out its first export consignment to India via the Chabahar port.

This strategic relationship that it has with Iran would be thoroughly looked into before it decides what to do about the sanctions in place by the US. The port holds more significance than ever considering China’s investment into the Gwadar port in Pakistan.