DNA Edit: Oil from Iran – India unfazed by US threat of sanctions

Oil Minister Dharmendra Pradhan’s assertion that India would continue to buy crude oil from Iran even after US sanctions come into force on November 4 underscores the government’s resolve to be guided solely by national interest. While Washington and its camp followers may see this as defiance of the US, particularly President Donald Trump’s administration, such a view is very narrow and US-centric. Such a perception ignores India’s energy interests as well as its political, economic and diplomatic rationale for not buckling under US pressure. From the standpoint of energy security, Iran is India’s third largest supplier and there is dedicated capacity in select refineries for processing Iranian crude. 

India has contractual obligations and there is no case for reneging on these because US sanctions would disable transactions with Iran based on hard currencies like the dollar and the euro. India and Iran can, as has been done in the past and regardless of sanctions, opt for rupee payment. Rupee-based imports would mean holding on to forex, especially dollar, reserves; which, in turn would prevent further erosion of the rupee value as a reaction to rising crude prices. This makes eminent economic sense and, therefore, US diktats that go against India’s economic interests are unacceptable. Politically, with the country in election mode, no government can risk being seen as surrendering to US threats of sanctions. 

Prime Minister Narendra Modi has already sent an unmistakable message to this effect in signing the deal for the S-400 missile defence system with Russia without being deterred by the US threat of sanctions. If India’s resolve held firm for defence cooperation, then there is no reason that New Delhi should waver when it comes to energy security. Diplomatically, like the defence deal with Russia, buying oil from Iran is another assertion of India’s strategic autonomy. The sooner President Trump accepts these realities, the better it would be for India-US relations.