New York: Most analysts who have a finger on the pulse of the burgeoning India-US relationship never expected Washington to skewer India over Iran. Turns out they were right. Secretary of State Hillary Clinton finally announced on Monday that India, South Korea, Turkey, Malaysia, South Africa, Sri Lanka and Taiwan will be exempted from financial sanctions because they have significantly cut purchases of Iranian oil.
Now that the threat of sanctions is over, India and the US are likely to have a more cheerful and stress-free strategic dialogue in Washington this week. India has repeatedly voted against old friend and oil supplier Iran at the International Atomic Energy Agency, and encouraged it to abide by the provisions of the non-proliferation treaty it signed. But India endured its own years of sanctions and isolation over the nuclear issue; it doesn’t like the policy, and it doesn’t believe it works.
Nevertheless, India and six countries join Japan and 10 other European nations already on a list those exempted from US sanctions in March. China, the leading importer of Iranian crude as of the first half of last year, and Singapore weren’t granted exemptions. Singapore is not a big consumer of oil, but it is a major blender of fuel, including some from Iran.
According to the US Department of Energy, India and South Korea, who were exempted on Monday, were the third and fourth-largest buyers of Iranian oil in the first half of last year.
“By reducing Iran’s oil sales, we are sending a decisive message to Iran’s leaders: until they take concrete actions to satisfy the concerns of the international community, they will continue to face increasing isolation and pressure,” Clinton said in a statement.
Sumit Ganguly, a member of the Council on Foreign Relations, in New York, was unerringly right in telling Firstpost in an interview in May that although the US has sometimes been impatient with India’s efforts to cut its oil imports from Iran, it would hold off on sanctions.
“I was always confident the US would not impose sanctions, primarily because the relationship is multi-faceted today and it would unnecessarily generate tensions in the relationship,” said Ganguly, who holds the Rabindranath Tagore Chair in Indian Cultures and Civilizations at Indiana University, in Bloomington.
“I think it is not insignificant that China has not been cleared. That reflects America’s concern about China continuing to work with Iran,” he added.
Even if countries are omitted from the list, it does not necessarily follow that the US would quickly impose sanctions after 28 June on countries like China. It would take some time for the US to gather evidence to support punitive measures against financial institutions that have processed Chinese oil transactions. China already settles some of its oil debts through barter, according to Iran’s central bank governor Mahmoud Bahmani.
Under the law President Barack Obama signed last year, countries have till until 28 June to demonstrate they have “significantly reduced” the volume of their Iranian crude purchases or their banks that settle oil trades with Iran may be cut off from the US financial system. According to US Treasury officials, at least 80 major banks have committed not to finance exports to Iran or to process dollar transactions for Iranian banks.
The US has left a little wiggle-room for itself by not defining what counts as a “significant reduction.” Obama administration officials, speaking on condition of anonymity told Bloomberg in March they’re looking for reductions of 15 percent or more, depending on each nation’s circumstances.
Minister of State for Petroleum and Natural Gas RPN Singh told the Rajya Sabha last month that refiners are targeting an 11 percent overall reduction in crude imports from Iran this fiscal year. Indian refiners plan to import around 15.5 million metric tons of crude from Iran in the 2012-13 fiscal year, down from the 17.44 million tons purchased in 2011-12 and 18.50 million tons in 2010-11, Singh told the Rajya Sabha.
The Hindustan Times reported in March that the government had directed Mangalore Refinery & Petrochemicals Ltd. and Essar Oil Ltd, the country’s top two importers of crude from Iran, to reduce Iranian oil shipments by at least 15 percent this financial year.
External Affairs Minister SM Krishna will co-chair the third annual strategic dialogue with Clinton in Washington on Wednesday where the two countries will discuss everything from hardcore strategic ideas to key developmental issues
“Secretary Clinton’s announcement has removed an important irritant in the India-US relationship. It is obviously a very positive development ahead of the strategic dialogue,” said Ganguly.