Amidst talks of the United States reimposing sanctions on countries that import oil from Iran, reports have claimed that it might grant India a waiver. According to reports, the USA has broadly agreed to slack its norms for India which would allow Indian companies to import as much as 2.5 million tonnes of oil per month from the middle eastern nation.
The US plans to enforce the oil-related sanctions on Iran from November 4 to block Tehran’s biggest source of income and bring it to the table to renegotiate a new nuclear deal. According to the US, any country or a company that engages with Iran after the sanctions kick-in will be liable to get cut off from the American financial system. The USA wants to force Iran into stopping its involvement in the Syrian conflict and shut its ballistic missile programme.
The US had stated that it expects every country to reduce its oil import from Iran to zero but was open to country-specific waivers that would allow limited imports to those assuring significant cut. India and other key countries have been engaged with the US for obtaining a waiver from the sanctions.
According to the sources, India and the US have broadly agreed on waiver and India will reduce its import by 35% from last year which is deemed significant. The USA has reportedly indicated that it is in the middle of an ‘internal process’ of considering SRE (Significant Reduction Exemptions) waivers for countries that promise to reduce their oil import from Iran.
As India defies the sanctions and goes for shopping oil, the grant of waiver could be considered as an attempt by the US to lure India and dissuade it from continuing to import Iranian oil. It is expected that the two countries India and Iran will stick to the existing mechanism of trade in which 55% of the payment is done in euros and the remaining 45% is in rupee through UCO bank. Under this trade, the rupee will be used by Iran for importing rice, drugs and other products from India, while the euros ensconce in the Indian bank waiting for the sanctions to go. Earlier, India and Irans were in talks of shifting entirely into rupee trade.
22 million tonnes of crude oil was imported by India in 2017-18 and had planned to raise it to 30 million tonnes before the looming threat of sanctions kicked in. India will reduce its import to 14-15 million tonnes to conform with the US stipulations of getting a sanction waiver. The oil companies, however, are yet to decide on how the quantity of oil imported will be distributed among them.
India and the US were engaged for months in discussing the modalities for the waiver. India prefers Iranian oil as it is less expensive and meets the technical requirements of Indian oil refineries. Recently, India had defied the threat of US sanctions and declared that it would go ahead with the purchase of S-400 air defense systems from Russia.