WELCOME EXEMPTION

With the US Government exempting India from the sanctions that President Trump has reimposed on Iran from November 5, this country has reason to feel relieved. The exemption was expected, though the erratic decision-making process having become a hallmark of Trump, one could never be certain. Eight countries were exempted from the omnibus sanctions. Among the eight are China, South Korea, Iraq, Japan and Turkey. India being the second biggest oil importer from Iran, the exemption is in the mutual interest of both countries. Given Iran’s troubled relationship with the US, and the open threat of sanctions by Trump after he reneged on the Iran nuclear deal, India has gradually reduced its dependence on Iranian imports. Yet, a disruption in the imports would have proved problematic, both on alternative supplies and pricing. Apparently, till sometime in May next year, India is assured of firm supplies from Iran at competitive rates with payments most likely to be made in Indian currency. Iran expects to use the proceeds for imports of Indian goods. Though the terms of the waiver are unknown, it is expected that the arrangement worked out by the governments of Iran and India both on quantity of imports and pricing will easily pass muster. It is notable that the longstanding allies of the US, Canada and members of the European Union have not been spared the rigours of the US sanctions against Iran. The EU and Canada, incidentally, have committed to honour the Iran nuclear deal, a snub to the Trump Administration. Various European companies have on-going projects in Iran which they can continue only at the pain of a boycott by the US businesses, a factor in their decision to abandon doing business with Iran till the pendency of the US sanctions. Thanks to the US exemption of India, the committed supplies of Iranian oil might last till after the next general election due before end-May next year. But whether the sanctions will result in reduced supplies of crude oil in the global market and consequently have a cost-push effect on the oil prices is not clear. But Saudi Arabia, a bitter foe of Iran, and the largest producer of oil, with considerable influence in the Organization of the Petroleum Exporting Countries, will try to make the most of the sanctions against Iran. However, any attempt to exploit it for pushing the global oil prices can prove counter-productive, especially when a majority of the countries are not convinced of the justification of the US sanctions against Iran at the prodding of Saudi Arabia. Trump will court further unpopularity in the world community if he makes life tougher for the oil-importing nations.