The EU and U.S are already forcing chief importers of Iranian crude to cut down their quotas ahead of the sanctions. What would be the repercussions of isolating an important energy-rich country?
The game is about to get more complex for Iran
Unilateral sanctions imposed by United States against Iran, could have serious repercussions for global peace and the international economy. Russia and many others believe that these sanctions may ultimately backfire, dissuading Iran to continue any further negotiations on the issue of nuclear proliferation. Russian Deputy Foreign Minister, Gennady Gatilov, recently dismissed the possibility of imposing any new sanctions against Iran by the UN Security Council. He emphasized the significance of adopting strategies to lift sanctions against Iran, which showed cooperation during talks in Istanbul. The United States and its allies, however, have expressed inflexibility over the nuclear issue and intentions to impose stringent sanctions.
India has made it clear that it only abides by the United Nations’ sanctions on Iran, and is not obliged to adhere to the unilateral curbs imposed by the US on hydrocarbon purchase from the Islamic Republic. US Secretary of State, Hillary Clinton, during her threeday visit to India in early May 2012, pressurized India to cut trade with Iran. After her visit, the Indian Government promised to cut down crude import from Iran by 11% in 2012-13. Though Clinton expressed satisfaction over cuts in Indian imports of Iranian oil, she called for further slashes, saying, “If the international community eases the pressure or wavers in our resolve, Iran will have less
incentive to negotiate in good faith to abandon its nuclear ambitions.” Like their international counterparts, Indian corporations and banks are facing the prospect of tough US penalties, starting end-June, for doing business with Iranian banks. In conjunction with a European em-
bargo, the American legislation aims at choking Iran’s oil exports and crippling the Iranian economy.
Though the EU and US sanctions targeting Iran’s oil export revenues have yet to come fully into force, the imminent threat has already led countries and companies to take steps to reduce their purchases of crude oil from Iran. An EU ban on the import and transport of Iranian oil, agreed to in January and modified in March, is not due to take effect until July 1, 2012 but many of Tehran’s customers in Europe have already begun replacing their Iranian supplies. Recent comments from Iranian oil officials suggest that Iran’s total crude exports have already fallen by 200,000 barrels per day (b/d) from last year’s levels. Mohsen Qamsari, head of international affairs at the National Iranian Oil Company, told a news conference in Tehran on April 20 that current exports stood at 2.1 million b/d, clearly avoiding any comparison against previous levels.
Japan’s crude oil imports from Iran fell 36.4% in March from a year earlier, with the world’s third largest oil consumer staring at a complete halt in imports from the OPEC member due to tightening Western sanctions. Kuwait and top exporter Saudi Arabia are the main beneficiaries of the fall in Iranian shipments, along with new suppliers such as Gabon, as Japan buys more oil for firing generators following last year’s nuclear disaster. North Asian states imported 305,114 barrels of crude oil from Iran in the first quarter, down 31.2% from 2011, when they purchased 443,535 barrels. The United States and Europe are trying to squeeze the revenues Iran makes from its oil exports to force it to halt a nuclear program that allegedly would be used to make weapons but which Tehran argues is for power generation. In addition, tough new European Union sanctions aimed at stopping Iran’s oil exports to Europe also ban EU insurers and reinsurers from covering tankers carrying Iranian crude oil anywhere in the world from July 2012. Around 90% of the world’s tanker insurance is based in the West, so the measures threaten shipments to Iran’s top Asian buyers as well.
China’s crude imports in the first quarter of this year from Iran were a third lower at 346,183 barrels compared to a year earlier, while South Korea cut imports by 22% to 195,000 barrels. South Korea’s largest refiner SK Energy, also the country’s top buyer of
Iran is bound to lose revenues, but more significantly, it will suffer international isolation. The United States is using India as an ally to achieve this.
Iranian crude, is securing alternative supplies to make up for a potential cut in Iranian imports. Energy-deficient India is looking for liquefied Shale Gas from the United States as the Petroleum Ministry decides to cut crude oil imports from Iran substantially. Succumbing to US pressure, other states including Sri Lanka are also toeing the same line.
Iran is bound to lose revenues, but more significantly, it will suffer international isolation. The United States is using India as an ally to achieve this. In February, after months of hesitation, India voted for a Western-backed resolution in the UN Security Council against the Syrian regime of President Bashar al Assad, Iran’s regional ally. In return, during her visit to India, Hillary Clinton signed agreements to buy rice, sugar and soya beans. Additionally, the United States is encouraging closer ties between Bangladesh and India for countering Iranian and Chinese influence in the region. During recent visits to Bangladesh and India, Clinton emphasized the advantages of enhanced Indian trade with South East Asia, declaring that Kolkata would become a hub for a new ‘Silk Road Strategy’ connecting countries in East, South and Central Asia.
It is election year in the United States and the Obama administration is pleasing the influential Jewish Lobby by pressurizing Iran on all fronts, demanding that it make major concessions at talks while threatening sanctions and military action. US aggression is sharply increasing tensions not only in the Middle East but also in South Asia. The US Special Envoy to India, Carlos Pascual, will soon force India to sharply reduce its crude oil imports from Iran. In this scenario, India will be a gainer; not only getting alternative sources of hydrocarbon from the US but also strategic advantages in the region.
Iran has shown reconciliatory gestures in talks with the Group 5+1 (the five permanent UN Security Council members plus Germany). All the negotiating sides must find a political settlement to the issue. After two rounds of fruitful talks with six world powers, Tehran is justified for demanding withdrawal of sanctions. Sanctions pose hurdles in future talks between Iran and the world powers. If peace has to be given a chance, both US and Iran hardliners will have to retreat from their present positions.