(Online Course) Contemporary Issues for IAS Mains 2012: The Hindu - Don’t give up on Iran Oil

The Hindu

 Don’t give up on Iran Oil

Q. Write a short notes on India’s Logjam situation to Curtail Oil Imports from Iran.

Answer: India finds itself in a rather difficult situation following the West’s sanctions on Iran and the overt pressure being brought on it by the United States to curtail oil imports from the Gulf nation. Iran is India’s second largest supplier of crude oil after Saudi Arabia and given the growing energy requirements of the country, it is not a viable option to close the tap on Iran, even if the West has done so. India should be guided in this issue solely by its own interests and not by sanctions that the U.S. and Europe may apply outside of the United Nations umbrella. Indeed, the pressure has been on for more than a year now on India. First, the payments for Iranian oil imports through banks based in the West were choked but India found a way out by routing money through a Turkish bank.

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But with pressure mounting on Turkey to close the channel, India and Iran agreed to rupee payments with about half the value of imports to be paid thus. And now, there is pressure to wind down imports from Iran totally, not just on India but also on China and Japan. While Japan is negotiating with the U.S. to keep a part of its imports out of the sanctions, China has thus far ignored them.

India, however, appears to be succumbing to pressure. Recent reports speak of Mangalore Refinery and Petrochemicals Ltd, the biggest consumer of Iranian crude, reducing its imports for the next fiscal by almost half. This is rather worrying because Iran accounts for 12 per cent of India’s crude oil imports and it will be extremely tough to find a viable replacement for that quantum in the prevailing stretched market conditions for oil.
The replacement price could also be higher. Policymakers should strategise to find an intelligent way out of the problem rather than giving in to American demands. Iran is said to be entering into barter deals with countries such as Russia by exchanging oil for wheat. India should offer similar bargains to Iran for not just food grain but also refined petroleum products. It is strange but true that Iran, despite being a major oil supplier, is short on refining capacity. India can undertake to supply transportation and other fuels to Iran in lieu of payments for its crude supplies. Public sector refiners who source Iranian crude can re-export refined products to that country. Iran has also offered to supply oil to India through its own tankers if India is unable to charter vessels due to insurance problems. Indeed, there are reports of some oil parcels being delivered to India thus in the last few weeks. India should engage with Iran to consider imaginative payment and transportation options tomaintain supplies rather thanmeekly submit to unfair pressure.

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