IRANIAN OIL SANCTIONS

IRANIAN OIL SANCTIONS

Kamaraj IAS Academy | IRANIAN OIL SANCTIONS
  • November 9, 2018, 5:05 pm

IN NEWS

The U.S. administration’s decision to grant India and seven other countries waivers on the sanctions it re-imposed on Iran provides some temporary relief to India. While the details of the waivers are yet to be released, the Trump administration has agreed to waive sanctions on the purchase of oil from Iran for about six months.

REASON BEHIND THE SANCTIONS

Since Iran's nuclear programme became public in 2002, the International Atomic Energy Agency (IAEA) has been unable to confirm Tehran's assertions that its nuclear activities are exclusively for peaceful purposes and that it has not sought to develop nuclear weapons.

The United Nations Security Council has adopted six resolutions since 2006 requiring Iran to stop enriching uranium - which can be used for civilian purposes, but also to build nuclear bombs - and co-operate with the IAEA. The US and EU have imposed additional sanctions on Iranian oil exports and banks since 2012.

The United States has reimposed sanctions on Iran that it lifted just two years ago. President Donald J. Trump withdrew from the multilateral deal, known as the Joint Comprehensive Plan of Action (JCPOA), for “disastrous flaws” that he said posed a security threat.

IRAN NUCLEAR DEAL

The Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action, offered Tehran billions of dollars in sanctions relief in exchange for agreeing to curb its nuclear program.The Iran nuclear deal is an agreement on the nuclear program of Iran reached in 2015 between Iran, the P5+1 (China, France, Russia, United Kingdom, United States—plus Germany), and the European Union. The deal was sealed in July 2015, under President Barack Obama.

The agreement was aimed at ensuring that "Iran's nuclear program will be exclusively peaceful." In return,  U.N. Security Council and other sanctions, including in areas covering trade, technology, finance and energy were lifted.

Tehran acceded to a 10-year restriction on nuclear production, agreed to shut down thousands of centrifuges and exported almost all of its bomb-making material. Under the agreement, Iran agreed that "under no circumstances will Iran ever seek, develop or acquire any nuclear weapons."Iran also allowed a strict monitoring regime, permitting international inspectors to gain access to sites suspected of nuclear weapons-related activities.The agreement did allow for a commercial nuclear program "for exclusively peaceful purposes."

WHY IS THE DEAL CONTROVERSIAL?

As of May 2018, there was broad consensus that Iran has abided by the agreement.Israeli Prime Minister Benjamin Netanyahu, however, has alleged that "Iran lied" about its nuclear weapon ambitions in the 2000s, although the information he shared seemed to match up with what nuclear inspectors had already reported about Tehran's program.

Critics also allege that the deal itself is flawed and does not prevent Iran from engaging in aggressive actions that fall outside the pact’s purview, such as pursuing a ballistic missile program and expiration dates on some restrictions, as well as extending its influence throughout the region.

IMPOSE OF SANCTIONS AGAIN

On May 8, 2018, Trump announced the U.S. would reimpose sanctions on Iran, leaving other nations involved scrambling to salvage the pact.Restoring sanctions amounts to a U.S. breach of the original deal whereas Iran was deemed to be compliant, according to international nuclear inspectors.

IMPORTANCE OF IRAN FOR INDIA

Presently, Iran is India’s third largest supplier of crude oil. However, the India-Iran relationship transcends oil. India, with an investment of $500 million, aims to develop Iran’s Chabahar port as a transit hub for Afghanistan, Central Asia, and the International North-South Transport Corridor (INSTC). Additionally, India is developing two gas fields, namely Farzad-B gas field located in Tehran and the South Pars field located between Iran and Qatar. These projects clearly highlight India’s long-term engagement with Iran.

INDIA ‘S CONCERN

India needs to maintain the fragile Shia-Sunni balance while simultaneously factoring in the concerns of Iran’s rival Gulf nations like Saudi Arabia and the UAE. Besides oil, these countries have a huge Indian diaspora and are also the largest source of remittances (accounting for approximately 36 percent of the total India receives).  There have been already attempts by Saudi Arabia and UAE to entice India. However, the actual materialization of these deals needs to be assessed carefully before taking any decision.

Iran-China’s concern for India

India should also pay attention to the Chinese dimension. The renewed U.S. sanctions would force Iran to drift sharply toward non-Western powers like Russia and more so toward China. Chinese officials often characterize the relationship with Iran as “20 centuries of cooperation” and Beijing has shown no intention to scale down those ties. Iran, owing to its geography, plays a crucial role in China’s Belt and Road Initiative (BRI). China could leverage this as an opportunity to further consolidate its hold. There is a possibility of a petrol yuan emerging, with China using its renminbi in transaction with Iran, an important step toward the internationalization of the Chinese currency. China-Iran engagement will undermine the impact of U.S. sanctions and put Beijing on the higher ground vis-a-vis countries like India and the United States. Thus, India needs to carefully asses these situations while formulating its response.

 

What s the way forward by India ?

The scrapping of the nuclear deal is bound to have widespread repercussions for the regional security architecture in particular and global polity in general

India succeded in getting the waiver which it long argued for, waivers regarding oil trade (given Iran’s importance to Indian energy security) and critical projects like Chabahar port.

 The absence of Iranian oil could shoot up prices in the oil market, subsequently raising India’s import bill. India can contemplate lowering tariffs for U.S. goods in exchange for a sanctions waiver.

New Delhi also needs to strongly push for Chabahar and frame it in tandem with Trump’s objectives in Afghanistan – the port would reduce Afghanistan’s dependence on Pakistan and would allow India to engage more constructively in the region.

Finally , The United States has exempted China, India and Japan from oil sanctions on Iran.India should now negotiate with Iran for a rupee-rial system and efforts should be made to revive Irano-Hind, a jointly owned shipping company that was shut down in 2013. India needs to do a holistic assessment of the situation and not tie itself to any particular country.

 

 

 

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