India may not escape Iran oil sanctions as US stands firm

Stung by the US decision not to extend exemptions to sanctions on Iranian oil imports beyond May 2, the Indian government said on Tuesday that it had put in place a “robust plan” to ensure the measure doesn’t affect supplies of crude oil to refineries.

India also said it will continue to work with partners, including the US, to protect the country’s energy security even as the move announced by US secretary of state Mike Pompeo on Monday created uncertainty about making up for a shortfall when imports from Iran go to zero in a little more than a week.

After the US pulled out of the Iranian nuclear deal last year and announced it would reimpose sanctions on Tehran’s oil exports, India and eight other countries, including China, Turkey, Japan and South Korea, were in November granted exemptions for six months on the ground they would progressively reduce imports.

India had been hopeful the exemptions, known as “Significant Reduction Exceptions (SREs)”, would be further extended but Indian officials said Pompeo’s remarks made it clear oil imports from Iran would be a “closed option” from May 2, when the SREs expire. “The government of India has put in place a robust plan to ensure that there is adequate supply of crude oil to Indian oil refineries from May 2019 onwards. There will be additional supplies from other major oil producing countries from different parts of the world,” said a spokesman for the ministry of petroleum.

Indian refineries are “fully prepared without any problem” to meet the national demand for petrol, diesel and other petroleum products, he added.

External affairs ministry spokesperson Raveesh Kumar said the 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 too said the government is “adequately prepared to deal with the impact of this decision” but didn’t give details.

People familiar with development said while the US decision will affect Washington’s friends and partners, it was intended to put maximum pressure on Iran. The ending of the exemptions was not aimed specifically at India or intended to pit India against Iran, they added.

The US had been working with affected countries and oil producing nations, specifically Saudi Arabia and the United Arab Emirates, to obtain commitments to increase production to offset the reductions in Iranian exports and ensure stability in the energy market, the people said.

Washington’s approach was guided by Tehran’s behaviour over the past year, including its “provocative and undermining” activities through proxies such as Hezbollah or Houthi rebels in Yemen, the people said. The campaign to end Iran’s support for terror is as important as efforts to stamp out terror in India’s neighbourhood, they added.

The sanctions had affected Iran’s ability to fund Hezbollah and fighters in Syria and already reduced its oil exports by more than 1.5 million barrels per day. The situation can change if Iran agrees to renegotiate the nuclear agreement or Joint Comprehensive Plan of Action (JCPOA) and ends malign activities in the region, the people added.

With US secondary sanctions set to kick in on importers of Iranian oil, the escrow account set up India for payments in rupees to Iran can also no longer be used for transactions, the people indicated. The money in the escrow account can be used by Iran to purchase food, medicines and agricultural equipment but no more money can go into the account, they added.

However, there has been no change in the exemption from US sanctions given for India’s development of Chabahar port in Iran, the people said.

Iran, along with Iraq and Saudi Arabia, was among the top three suppliers of oil to India. However, its exports have fallen from 27.2 million tonnes in 2016-17 to 23.5 tonnes in 2018-19. Iran accounted for 14% of India’s oil imports in February 2018, but a year later, on account of the sanctions, it accounted for just 5% of India’s imports (which went up in this period).

First Published:
Apr 23, 2019 23:09 IST

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