India’s plan to cut Iran oil is likely to ease US pressure

New York: India will win breathing room after Minister of State for Petroleum and Natural Gas RPN Singh told the Rajya Sabha on Tuesday that refiners are targeting an 11 percent overall reduction in crude imports from Iran this fiscal year. The announcement came as Carlos Pascual, the US special envoy who has been negotiating with Iranian oil buyers to cut their imports, met Indian foreign ministry officials on Tuesday. In addition to India and China, the top two importers of Iran’s crude oil, the US has asked ten other major oil importers, including Turkey and South Korea, to reduce their purchases of Iranian oil by 28 June or face sanctions on financial institutions that do business with Iran’s central bank. [caption id=“attachment_302231” align=“alignright” width=“380” caption=“The US is unlikely to impost sanctions in India for continuing to source oil from Iran. AP”]  [/caption] Washington has not stated specifically what cuts it expects from each country, only that they must be substantial. “This will stave off immediate pressures, but they will build up again because of the election season. Pressure will inevitably mount on Obama, and the president in turn will feel pressured to demonstrate that he can convince others not to buy Iranian crude,” said South Asia expert Sumit Ganguly, a member of the Council on Foreign Relations, in New York. Although the US has sometimes been impatient with India’s efforts to cut its oil imports from Iran, no one seriously expects Washington to slap sanctions. “If the US imposes sanctions, I think the Indo-US strategic partnership will basically fall apart,” said Ganguly, who holds the Rabindranath Tagore Chair in Indian Cultures and Civilizations at Indiana University, in Bloomington. Ganguly rated the chances of Washington slapping sanctions as “pretty slim.” Trita Parsi, founder and president of the Washington-based National Iranian Council, also told The Wall Street Journal that it seems unlikely that the US is willing to risk a conflict with India over this issue. “India is such an important country that it has become difficult for the United States to increase its pressure on India too much,” Parsi told the Journal. [caption id=“attachment_310516” align=“alignleft” width=“150” caption=“Sumit Ganguly”]  [/caption] Secretary of State Hillary Clinton said last week that she was encouraged by the steps taken by India to cut Iranian imports, even as she leaned on New Delhi to cut its imports of Iranian oil further. 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 said in response to a Rajya Sabha member’s query. In March, the Hindustan Times cited unidentified government officials saying India may be exempted from US sanctions because of its plans to reduce Iranian oil imports by as much as 20 percent. “While the government is publicly maintaining that it does not support the US sanctions against Iran and that it will not seek any waiver to the US measures, it has quietly issued informal diktats to state-owned oil refining firms to undertake cuts in oil imports from Iran and diversify the oil importing sources,” reported Hindustan Times. The government has 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, two people with knowledge of the move said earlier this month. Tanker discharge data also showed last week, that India’s crude oil imports from Iran declined by about 34 percent in April compared with March. Singh told parliament that India currently imports oil from more than 30 countries, and “there is no shortage or gap envisaged in crude-oil procurement” by local refiners. The Obama administration has exempted 10 European Union countries and Japan from US economic sanctions while crediting them with “significantly reducing” their purchases of petroleum from Iran. The Indian government feels it is unfair for the West and the US in particular, to put India in a position where it has to choose one friend over another. “India’s relationship with Iran is neither inconsistent with non-proliferation objectives, nor do we seek to contradict the relationships we have with our friends in West Asia or with the US and Europe,” the Indian Embassy in Washington said in exasperation in March. The Embassy also criticised the US media for projecting a “distorted picture of New Delhi’s foreign policy objectives and energy security needs” by using data selectively about its imports from Iran. India, which relies on Iran for about a tenth of its crude imports, is finding it increasingly tough to access Iranian oil due to insurance and bank settlement obstacles set up by the West. According to US Treasury and State Department officials, at least 80 major banks have committed not to finance exports to Iran or to process dollar transactions for Iranian banks.