Headline : U.S. ends waiver for India on Iran oil
- Recently, the United States has decided not to issue any additional Significant Reduction Exceptions (SREs) to existing importers of Iranian oil.
- Joint Comprehensive Plan of Action (JCPOA) was signed between Iran and the P5, plus Germany and the EU in 2015, which aimed at curbing Iran’s nuclear programme.
- Under the deal:
- most of Iran’s enriched uranium was shipped out of the country
- a heavy water facility was rendered inoperable
- operational nuclear facilities were brought under international inspection
- In return, the deal involved lifting of international sanctions on Iran.
- In May 2018, the United States pulled out of the Iran nuclear deal, citing the below reasons:
- The deal did not target Iran’s ballistic missile programme.
- It does not focus on Iran’s nuclear activities beyond 2025.
- It also leaves Iran’s role in conflicts in Yemen and Syria.
- According to US, the ‘one-sided deal’ did not bring calm and peace to the region.
- Later in June 2018, Iran notified IAEA of it’s nuclear enrichment plans.
- In reaction to this, US announced sanctions on Iran again in November 2018.
Significant Reduction Exceptions (SREs)
- In November 2018, Eight countries (India, China, Japan, South Korea, Turkey, Italy, Greece and Taiwan) were given exemptions from US sanctions for importing oil from Iran for a 180-day period, which is due to expire on May 2.
- Now, the U.S. has clarified that it will not renew exemptions from its sanctions for importing oil from Iran.
Impact of non-renewal of waiver
- Oil exports from Iran hit a low of 1.0 million bpd in March 2019, down from 2.5 million bpd in April 2018 and is expected to further reduce after the end of waiver.
- India, China, Japan, South Korea and Turkey will be the most impacted by the non-renewal of waivers.
- However, the other three currently exempted countries Italy, Greece and Taiwan have already reduced their imports from Iran to zero.
- Also, the sanctions have provided the U.S. an opportunity to put more of its own crude on the market.
Impact on India
- The re-imposition of sanctions will impact India’s oil imports and may also surge oil prices in India.
- It may also impact the development of the Chabahar port (Iran), which has a strategic value for India allowing access to Afghanistan and Central Asia.
Way ahead for India and Iran:
- Options like the Rupee-Rial trading mechanism can be explored.
- Opening of Iranian banks in India and Indian banks in Iran could also be considered. This would facilitate movement of money and income between the two countries.