The scourge is back and so it seems with the waiver of sanctions that US had given to some countries, including India, on purchasing Iranian oil which has finally come to its dead end. Further oil purchases of India from Iran, will significantly hurt the former’s relations with USA. It may be assumed as a straw in the wind that India must be ready for. The near future–especially after the Lok Sabha Elections– will presumably be marked by a possible increase of India’s crude oil bill, domestic inflation, current account deficit and a more or less depreciation of Rupee. The Rupee, which recently acquired the place of best performing Asian currency from the worst performing, will inevitably be impacted by this coarse stance of USA.

Inevitably, India will have to fill the vacuum of energy needs left by Iranian oil cut, through other source countries, where India does not enjoy the concessions like 60 days credit, free insurance and transport, which Iran offers to India. All in all, Indian economy has to bear this embittered taste of US atrocity on Iran. The jolt to India’s energy needs is not just restricted to Iranian oil. Venezuela, another major energy partner of India – has also antagonised America by allowing Russian Air Force officers on its land to counter US’ moves to destabilize Nicholas Maduro’s Government. Now both, Iran and Venezuela have been punished and severely inflicted by America’s sanctions under its CAATSA Act (Countering America’s Adversaries through Sanctions Act).

Perhaps, the grave energy crisis which India is advancing towards could have been smelled at the earliest, when US President Donald Trump took his country away from the Joint Comprehensive Plan of Action, commonly known as ‘Iran deal’, which was formed by P5+1 countries under the commendable leadership of former US President Barack Obama.

In July 2015, the five permanent members of UN Security Council alongside Germany sat on the same table to forge the said pact with Iran that said all the sanctions on it will be removed if Iran, altogether, abandons its nuclear program. But apparently, this pact with Iran was offending the eyes of Donald Trump, right since his election to the US top office. He, in May last year, rubbished the pact, saying that US could forge a better deal by putting more pressure on Iran and, officially, withdrew from the Iran deal. Trump, at first, targeted Iran’s economy to compel President Hassan Rouhani to give in to the US pressure by foisting sanctions on Iran’s oil business.

US asked Iran’s top oil importers including India, China, Japan, South Korea, Turkey, Taiwan and others to avoid purchasing Iranian oil. Although, initially all these countries showed their reluctance owing to their rising energy needs, following which US gave a waiver of sanctions for six months to some of the leading buyers of Iran oil. Now that, the deadline of those sanctions waiver is due to expire on May 2, US has issued a warning to the world of lethal consequences against the further oil imports from Iran.

Now the questions that arise are – how will India take it all in its stride? Will India succeed in persuading US for further sanctions waiver using its diplomatic wit? Can India afford to lose a strategic partner in middle east region like Iran, taking in account to Chabahar Port investments? Well for now, the answer of all these questions lies in the dark.

Being the third largest oil importer of Iran, India, while purchasing former’s oil, enjoys privilege of making the payments in Euro or Rupee and, for that matter, India imports a big chunk of an 18% of its total oil needs from Iran and Venezuela. Though, India is mulling over the option of oil import from US but if so, only the transport price will cost India an arm and a leg. Interestingly, according to reports, India and US also negotiating to bring down the transport cost of oil from US to India–more or less tantamount to the cost from Iran to India. But, for the time being until a deal is freezed, India is bound to bridge this lacuna of 18 % through other sources like Saudi Arabia, Iraq, UAE and Nigeria.

The ongoing scenarios bode ill for the international oil prices in the days to come. Provided India being the largest and a significant strategic partner of Chabahar Port project in Iran, putting the relations with Iran in the corner, too, is not in India’s favor. In this backdrop, India’s diplomatic wit and poise will be tested as how India fulfils its near future oil demands and, for that matter, without flying in the face of a significant diplomatic and strategic partner like US.

The Stalemate of Oil Diplomacy