walter russell mead peter berger lilia shevtsova adam garfinkle andrew a. michta
Feed
Features
Reviews
Podcast
India, Iran and Oil: What Gives?

Last week we highlighted a report from the International Energy Agency (IEA) that stated Iran’s oil production could plummet to levels last seen during the Iran-Iraq War three decades ago. The IEA has lately estimated that, from July onward, when EU sanctions come into effect, Iranian exports could be reduced by about 800,000 to one million barrels per day (b/d), a figure the Financial Times said was based on the “500,000-600,000 b/d of oil Iran exported to the EU before the advent of sanctions and the assumption that its other buyers would also scale back volumes in order to avoid falling foul of sanctions.”

But what happens if those “other buyers” decide to take advantage of cheaper Iranian oil to buy more, not less? Needless to say, even if Europe remains firm in its commitment to halt the import of Iranian oil, sanctions will not have their intended effect if other countries increase their orders from Tehran to make up the difference.

Which is why Obama’s Iran policy may hinge on India. Via Meadia has been following this issue closely; earlier this month we noted that India’s largest Iranian oil buyer planned to nearly halve its daily imports, reducing the amount of oil flowing from Tehran to Delhi by 20 percent. However, an article by Christopher Helman in Forbes attempts to cast doubt that account: “Instead of scaring India off Iran’s oil, so far it appears that U.S. sanctions are only having the effect of bringing India and Iran closer together.”

Helman continues:

Last week Jaipal Reddy, India’s oil minister, reportedly told parliament, “We respect U.N. sanctions, but will not honor any other sanction.” Adding, “We have cordial relations with Iran and we continue to import oil from them.” [...]

Furthermore, according to the Thai News Service, senior Indian officials said this week that the country will not reduce its imports from Iran and urged Washington not to make an example of Delhi.

It is hard to figure out what is actually happening, especially as the Forbes article is largely speculative in nature and offers little actual information beyond policy declarations. It is quite possible that the “senior Indian officials” quoted in the piece only meant to say that there is no explicit government policy to reduce imports from Iran — but that private suppliers will do as they will.  That way, India avoids the appearance of kowtowing to a Washington dictate even as its suppliers make a rational decision to limit their exposure to what may be a very unreliable source.

Relations between the U.S. and India have hit some turbulence lately, and Washington surely does not want to add further strain to the relationship by imposing sanctions on one of its most important allies in Asia. Non-sanction sanctions may be the way to go: Indian companies cut back their imports from Iran on business rather than on explicitly political grounds. India keeps its dignity, and Iran’s oil market shrinks.

This kind of two-track approach is pretty common in international life; we shall see if that is what is happening here as more figures on Iranian oil exports gradually come to light.

Features Icon
Features
show comments
  • Jim.

    “But what happens if those “other buyers” decide to take advantage of cheaper Iranian oil to buy more, not less?”

    We’re putting a lot of pressure on Iran that might simply help someone else win their trade war.

    Say, China.

© The American Interest LLC 2005-2014 About Us Masthead Submissions Advertise Customer Service