Buying oil from other sources can cause a big dent to Indian economy

In India, top ministers of Narendra Modi government held talks on the issue of investment in petroleum and gas sector a month after the US waiver for India to import oil from Iran came to an end. The meeting chaired by Home Minister Amit Shah was attended by Finance Minister Nirmala Sitharaman, External Affairs Minister S Jaishankar, Petroleum and Natural Gas Minister Dharmendra Pradhan and Railways and Commerce Minister Piyush Goyal.

The meeting gained significance as US President, Trump’s administration told India, China, Turkey and a few other oil customers of Iran that no waiver on sanctions would be granted to them after 1^st May 2019, ending six months of exception to the sanctions.

The US had granted exemptions to India, China, Japan, South Korea and Turkey “to ensure a well-supplied oil market” in November last year for six months after it re-imposed sanctions on the Persian nation in view of its controversial nuclear program.

India is said to be in touch with the US to seek further extension of the waiver on oil imports from Iran, pointed out that it has been gradually reducing its energy purchases from the Islamic country.

Two weeks after the US decision came into force, Iranian Foreign Minister Mohammad Javad Zarif travelled to India and met the then External Affairs Minister Sushma Swaraj. After her meeting with Zarif, she had said a decision on India’s oil imports will be taken after the elections keeping in mind India’s commercial considerations, energy security and economic interests.

Following the withdrawal of the US waiver, India has stopped contracting oil shipments from Iran. With 80 per cent of India’s requirements being met through imports, higher-priced oil from non-Iranian sources can make a big dent in the country’s current account deficit and foreign exchange reserves.

Oil imports from Iran in the past fiscal year ended March 2019 amounted to about US$9 billion. Official sources have said that getting oil from alternative sources would have financial implications and lead to further pressure when crude prices touch US$75-80 per barrel in the near-term, putting pressure on India’s import bill.

Iran used to offer India a longer credit period of 60 days compared to other crude suppliers, while the cargo insurance was free.

Imports from Iraq, UAE and Saudi Arabia will now be on the higher side, without some of the benefits that Iran was giving, India has been Iran’s second largest customer of oil, after China.

Chinese President says US pressure on Iran worrying

A rise in tensions in the Middle East owing to the US pressure on Iran is worrying and all parties need to exercise restraint, Chinese President Xi Jinping told Russian media ahead of a visit to the country.

Tension between Iran and the US has escalated over the past months, after the United States pulled out of a deal between Iran and global powers to curb Tehran’s nuclear program in return for lifting sanctions.

Washington re-imposed sanctions last year and tightened them sharply at the start of last month, ordering all countries to halt imports of Iranian oil. It has also hinted at military confrontation, sending extra forces to the region to counter what it describes as Iranian threats.

Chinese President told TASS news agency and Rossiyskaya Gazeta newspaper that because of the “extreme pressure” Washington has put on Tehran and the unilateral sanctions, tensions have continued to rise in the Middle East.

He reiterated, “The development of the situation is worrying.”

The Iran nuclear deal should be fully implemented and respected, as it is of crucial importance for peace and stability in the Middle East and non-proliferation, Xi added.

 “China and Russia’s views and positions on the Iran nuclear issue are highly aligned, and both hope that all relevant parties remain rational and exercise restraint, step up dialogue and consultations and lower the temperature on the present tense situation,” he said.

China has been angered by U.S. threats against countries and companies that violate U.S. sanctions by importing Iranian oil. China and Iran have close energy ties.

Xi did not directly address the oil sanctions issue, but appeared to allude to them by saying: “China will continue to firmly safeguard its own legitimate and lawful rights and interests”.

Iranians told not to take Trump’s bait and stay calm

A number of former Obama administration officials have quietly urged Iranian government officials to keep their heads cool in the face of the Trump administration’s maximum pressure policy against Tehran.

US officials have reached out to their contacts in the Iranian government, including Foreign Minister Mohammad Javad Zarif to tell them, “Don’t take Trump’s bait and stay calm”.

Conversations between former Obama officials and Iranian government officials have been ongoing since November 2016. But the recent round of conversations, which took place over the phone and in person over the last two months, came as lines of communication between the US and Iran, through intermediaries in Europe and elsewhere.

Tensions between Iran and the U.S. have grown in recent weeks, especially after the latter deployed an aircraft carrier strike group, B-52 bombers, and 1,500 more American troops in the region, citing unidentified Iranian “threats”. Iran’s Deputy Foreign Minister Abbas Araqchi said, “We are aware that evident elements are trying to put America into a war with Iran for their own goals.” He said US National Security Adviser John Bolton and “other warmongers” are plotting against Iran.

“War would be a disaster for everybody in the region. We hope that wisdom will prevail in Washington, that they do not make this biggest mistake in the region ever. But we are fully prepared for that scenario,” Araqchi said.

United States to end preferential trade treatment for India on 5th June 2019

President Donald Trump announced on Friday that the United States would end its preferential trade treatment for India on 5^th June 2019. Earlier, in March this year he had announced the intention to remove India from the Generalized System of Preferences (GSP) program.

Trump declared, “I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets.”

India is the biggest beneficiary of the GSP, which allows preferential duty-free imports of up to US$5.6 billion from the South Asian nation.

Indian officials have raised the prospect of higher import duties on more than 20 products of US origin, if President Trump drops India from the program.

The biggest point of satisfaction for India is that 24 members of the US Congress have sent a letter to the administration on 3^rd May 3 urging it not to terminate India’s access to the GSP.