- US has granted temporary waivers for Iran oil imports to eight countries including India owing to the significant reductions in their oil imports from Iran.
- India, China, Greece, Italy, Turkey, South Korea, Taiwan and Turkey are the eight major importers of Iranian oil who were spared from immediate penalties against oil imports.
- About the sanctions:
- The sanctions will penalise countries that do not end Iranian oil imports and foreign companies that do business with blacklisted Iranian firms.
- The sanctions also affect non-Iranian companies that deal with sanctioned Iranian firms and officials.
- In terms of products, the U.S. will exempt food, agricultural products, medicines and medical devices.
- The European Union (EU) including the U.K. will not be one of the jurisdictions granted a temporary exemption.
- There would be no exemptions for condensates. Earlier, Iran had exported some $1.5 billion worth of condensates in just three months of 2014 to get around sanctions.
- In terms of entities granted exemptions, there would be no exemption for Society for Worldwide Interbank Financial Telecommunication (SWIFT).
SWIFT has been told to cut off from sanctioned entities as soon as technologically feasible or could face sanctions either.
- However these exemptions will likely be for a short time period and US is likely to have the sanctions re-imposed which might have following impacts:
- The eight countries including India after grant of exemption, would be asked to bring down oil imports from Iran to zero in six months.
- During those six months, the importing country can buy Iranian oil but must deposit Iran’s revenue in an escrow account and Iran can spend the money but only on a narrow range of humanitarian items.
- India’s Case:
- India, which is the second biggest buyer of Iranian oil after China, is being pushed by the US to restrict its monthly purchase to 15 million tonnes a year down from 22.6 million tonnes bought in 2017-18 financial year, according to sources.
- The re-imposition of sanctions will not just impact oil imports, but will also impact the development of the Chabahar port.
- India’s investment in the Chabahar port, would face both direct and indirect sanctions as shippers, port suppliers and trading companies refuse to participate in the project.
- Since its inauguration in 2017, India has shipped about 110 thousand metric tons of much-needed wheat and 2000 metric tons of pulses from India to Afghanistan through this port.
- So the sanctions will threaten India’s $500 million investment in the port and its $2 billion plan for a railway line to circumvent Pakistan and reach Afghanistan and Central Asian trade lines via International North-South Transport Corridor (INSTC).
- There are not only rising costs of oil to contend with, but also the added cost of having to recalibrate Indian fuel refineries that are used to process Iran’s special crude.
- Most significant impact would be on India’s regional security situation, which could see the Iranian-Arab divide deepen, Afghanistan’s choices dwindle and an angry Iran pitched closer into the China-Russia
- With trade levels receding, the Iranian regime may well lose interest in the Chabahar option, and focus on its main port of Bandar Abbas instead, derailing India’s grander plans for regional connectivity.