Will India turn its back on Iran?

India will face considerable hardship as internationally the prices of crude oil have already gone up as tensions in the Gulf unfold. Domestically, consumers have already begun to feel the pinch, with the six-week election campaign duration check on petrol prices having been lifted. For the new government in Delhi, already facing an economic slowdown, the rising international prices of crude will further impact its difficult financial situation. India imports over 80% of its oil requirements

Not only Iran, but India too is in a bind after the US withdrew first from the Iran nuclear deal or Joint Comprehensive Plan of Action (JCPOA) last year and then, last month, withdrew the waivers from sanctions for trading with Iran from eight countries, including India.

With tensions in West Asia rising amid increasingly shrill rhetoric between Washington and Tehran and the arrival of a US carrier fleet in the Arabian Sea close to the Persian Gulf, India was happy to receive the suave Iranian Foreign Minister Mohammed Javad Zarif in New Delhi at very short notice and get a first-hand account of what is happening there. External Affairs Minister Sushma Swaraj took time out from election duties to meet Zarif, whose office had requested for the meeting.

Zarif, according to sources, explained that Iran would not initiate hostilities on its own but would retaliate if attacked. Tehran was still upholding the JCPOA even though Washington, in collusion with Israel, had unilaterally resiled from the agreement. Even more worrying for India, Zarif also mentioned Tehran’s intention to resume its nuclear programme, including uranium enrichment, once the US withdrawal was final and it was not bound under terms of the JCPOA.

Already feeling the pinch of US sanctions, Zarif, who was on his way to China to lobby for continued crude purchases, urged the Indian government to reconsider ending oil imports from Iran. While India has unofficially conveyed to the US that it would stop oil imports from Iran, oil imports from Tehran it has already contracted for would keep coming through July. Swaraj told Zarif that any decision on the issue of oil imports would be taken by the new government when it is formed in New Delhi.

Earlier, India has always maintained that it would only be bound by UN sanctions and not country-specific ones. However, given the wide-ranging nature of its financial and strategic ties with the US, India will not be able to withstand the pressure of the US sanctions, which would severely impact its banking sector and exports.

India will suffer not only because of the oil embargo, but also potential trade to Central Asia and Afghanistan through Chahbahar, said Manbir Singh, former Indian Ambassador to Iran. “Our investment in Farsi and Pars oil fields would be at risk,” Singh said, while India could “risk a further dent in exports to the Gulf area.”

According to the former diplomat, Zarif’s visit was to secure some assurances from India, which it could immediately not provide. According to Singh, India needs “very active diplomacy” with the US, Europe and Iran, China and Russia to arrive at a temporary solution to buy time.

India will face considerable hardship as internationally the prices of crude oil have already gone up as tensions in the Gulf unfold. Domestically, consumers have already begun to feel the pinch, with the six-week election campaign duration check on petrol prices having been lifted.

For the new government in Delhi, already facing an economic slowdown, the rising international prices of crude will further impact its difficult financial situation. India imports over 80% of its oil requirements. Iran provides India attractive discounts not only on pricing, but also on insurance and transportation of crude, while allowing a 60-day window for payments. India has been hit particularly hard by the US decision to end exemptions to sanctions on Iranian oil imports because Tehran was among New Delhi’s top three energy suppliers, providing 23.6 million tonnes of oil last year, about 11% of India’s petroleum requirements.

Iran’s Ambassador to India, Ali Chegeni, recently said that while India would decide on future oil imports according to its national interests, New Delhi should not ignore a reliable energy supplier such as Tehran.

Saudi Arabia and the United Arab Emirates are among the countries that have offered to step in and make up the shortfall from Iran but, officials say, India would still feel the pinch. The options for the new government will proverbially be between a rock and a hard place, as it not just a question of catering to the country’s energy security, but steering a course that is fraught with financial and strategic implications. The new Prime Minister will have to take that call sooner than later.