US ends waiver for Iran oil, India second biggest buyer after China

Shubhajit Roy
A gas flare on an oil production platform in the Soroush oil fields is seen alongside an Iranian flag in the Gulf (Reuters/File)

Moving to squeeze Iran's top export, the White House Monday said it will no longer grant sanctions exemption to Iran's oil customers. This could become a hot-button issue between India and the US given that the six-month waiver granted to India last November is set to run out.

"President Donald J Trump has decided not to reissue Significant Reduction Exceptions (SREs) when they expire in early May," the US administration said in a statement. "This decision is intended to bring Iran's oil exports to zero, denying the regime its principal source of revenue."

Apart from oil imports, India will also have to navigate a waiver for development of the Chabahar port which is of critical strategic importance to New Delhi.

Official sources said they have seen the US announcement and are "studying the implications of the decision". "We will make a statement at an appropriate time," a government source said.


Pressure to restrict imports

India was one of eight countries allowed temporary import of Iranian oil. Last November, US Secretary of State Michael R Pompeo said the US had agreed to exempt eight countries as they had made "significant reductions" in oil imports.

India, which is the second biggest buyer of Iranian oil after China, is being pushed by the US to restrict its monthly purchase to 1.25 million tonnes or 15 million tonnes in a year (300,000 barrels per day), down from 22.6 million tonnes (452,000 barrels per day) bought in 2017-18 financial year, according to sources.

But New Delhi had pushed back on zero oil imports, citing adverse impact on its economy and the inflationary fallout it would have.
Last September, during the Indo-US 2+2 dialogue, the US told the Indian side that it was not in Washington's interest to damage the Indian economy. External Affairs minister Sushma Swaraj and Pompeo had discussed the issue of oil imports from Iran.

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India is the world's third-largest consumer of oil, with 85 per cent of its crude oil and 34 per cent of its natural gas requirements being fulfilled by imports. In 2016, India imported 215 million tonnes of crude oil and at 13 per cent, Iran stood third among India's biggest oil suppliers, after Saudi Arabia and Iraq at 18 per cent each.

Even during the last set of sanctions between 2012 and 2015, India had continued to import oil from Iran. Although the value of oil imports had dipped from USD 11.6 billion in 2011-2012 to USD 4.3 billion in 2015-16, it had again climbed up to USD 8.9 billion in 2017-18.