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.

India seeking resumption of oil import from Iran

India is planning to resume oil imports from Iran and the new government is going to hold talks with Iran in order to discuss ways of getting around US sanctions like paying in national currencies.

“The Modi government will immediately initiate talks with Iran to discuss steps that will allow it to resume oil imports,” India digital news portal ‘The Print’ has reported quoting government sources.

According to the sources, Iran’s Pasargad Bank and India’s Reserve Bank could be used to arrange the payments.

“Payments can be deposited in the Iranian bank and then Iranian authorities can decide how to utilize the money,” a senior government official who didn’t wish to be identified said.

“These talks have been held earlier too but got stalled due to elections. Talks will be revived soon and this will be one of the first focus areas of the government.” the official said.

India stopped oil imports from Iran after the six-month sanction waiver from the US ended on 2nd May 2019.

The US administration re-imposed sanctions on Iran after withdrawing from the Iran nuclear deal, which was signed in 2015, along with European countries. .

The US had instructed India and other countries to cut oil imports from Iran to "zero" by 4^th November 2018 or face sanctions. However, Washington granted a six-month waiver to India and seven other countries to buy oil from Iran. The waivers expired in May this year.

India, which is the second biggest purchaser of Iranian oil after China, has since then restricted its monthly purchase to 15 million tons in a year or 300,000 barrels per day, down from 22.6 million tons or 452,000 barrels per day, bought in 2017-18 financial year.

India is world's third biggest oil consumer that meets more than 80% of its oil needs through imports.

Bolton adamant at instigating war between United States and Iran

While there is growing consensus that United States should abstain from instigating a war with Iran, warmongers like US National Security Adviser, John Bolton, spare no chance accusing Iran and creating war hype. Lately he said that naval mines “almost certainly from Iran” were used to attack oil tankers off the United Arab Emirates this month, and warned Tehran against conducting new operations.

According to a Reuters report, Bolton said the “prudent and responsible” approach taken by the United States, which has beefed up its military presence in the region, had made it clear to Iran and its proxies that such actions risked a “very strong” U.S. response.

He was speaking to reporters in Abu Dhabi ahead of emergency summits of Arab leaders in Saudi Arabia on Thursday called to discuss the implications of the tanker attacks, and drone strikes two days later, on oil pumping stations in the kingdom.

Tehran has denied involvement in either of the attacks and Iranian Foreign Ministry spokesman Abbas Mousavi dismissed Bolton’s latest remarks as a “ludicrous claim”.

The UAE has not yet blamed anyone for the sabotage of four vessels, including two Saudi tankers, near Fujairah emirate, a major bunkering hub just outside the Strait of Hormuz.

Riyadh has accused Tehran of ordering the drone strikes, which were claimed by the Iran-aligned Houthis who have been battling a Saudi-led coalition in Yemen in a four-year conflict seen as a proxy war between Saudi Arabia and Iran.

 Bolton said without providing evidence, “There is no doubt in anybody’s mind in Washington who is responsible for this and I think it’s important that the leadership in Iran know that we know.”

He declined to comment on the specifics of the investigation into the attacks in which the United States, France, Norway and Saudi Arabia are taking part, but said those other countries and ship owners involved could do so.

Bolton said the tanker attacks were connected to the strike on oil pumping stations on the kingdom’s East-West pipeline and a rocket attack on the Green Zone in the Iraqi capital Baghdad.

He said there had been a fourth unsuccessful attack on Saudi Arabia’s Yanbu port a few days before the tanker operation but that it was unclear if it was linked to the others. Saudi officials were not immediately available to comment.

Tensions between the United States and Iran have escalated since President Donald Trump withdrew from a 2015 multinational nuclear pact with Iran and re-imposed sanctions, notably targeting Tehran’s key oil exports. Iran says it will not be cowed by what it has called psychological warfare.

Iranian President Hassan Rouhani signaled on Wednesday that talks with the United States might be possible if Washington lifted sanctions and met its commitments under the nuclear deal, state television said.

Saudi Arabia and the UAE have backed sanctions against Iran, a fellow OPEC producer but a regional foe, and have lobbied Washington to contain Tehran.

Bolton said the United States was discussing next steps with Gulf allies and the goal was “to make it clear to Iran and its surrogates that these kinds of activities risk a very strong response from the Americans.”

“We are very concerned about the Quds Force and Qassem Soleimani using Shi’ite militia groups and others in Iraq as indirect ways to attack our embassy in Baghdad, consulate in Erbil, our various bases around the country,” he said.

The U.S. Combined Air Operations Center is based in Qatar and its navy Fifth Fleet in Bahrain. The U.S. air force also uses al-Dhafra airbase in Abu Dhabi.

Washington said it was sending 1,500 troops to the region after speeding up deployment of an aircraft carrier strike group and sending bombers and additional Patriot missiles.

Bolton also voiced concern about perceived threats from the overseas arm of Iran’s Revolutionary Guards.

Can Pakistan play a role in defusing Saudi-Iran conflict?

The Arab League and Gulf Cooperation Council (GCC) emergency summits called by Saudi Arabia are to be held on Thursday, a day before the long-scheduled OIC summit. It is not yet clear how many countries will take part in the emergency gatherings, but Qatar which has been boycotted by a Saudi-led alliance has been invited to attend the GCC meeting.

Riyadh cut diplomatic ties with Tehran in 2016 after protesters stormed Saudi diplomatic missions in Iran following its execution of a prominent Shia cleric. The OIC summit will address "current issues in the Muslim world" and "recent developments in a number of OIC member states", the official agenda states. Saudi Arabia and its allies have repeatedly accused Iran of interfering in the affairs of other countries, including Bahrain, Iraq, Syria, Lebanon and Yemen, by supporting and arming fighters.

Qatar has grown closer to Iran, while Kuwait has expressed concern over Iranian threats to close the Strait of Hormuz. Oman, which has good ties with both Iran and the United States, has said it and other parties "seek to calm tensions" between the two countries. Ahead of the summits, Iran's top diplomats have been touring the region, including Iraq, Kuwait, Oman and Qatar. Iran, which shares a border with Afghanistan, Pakistan, Iraq and Turkey, also has good relations with Ankara and Islamabad.

I am obliged to refer to an Editorial  published in one of Pakistan’s leading English newspaper and Dawn on 26th May 2019 that needs to be read by all Pakistanis very carefully and dispassionately. I have often asserted that Pakistan’s neighbors are turning hostile because the successive governments have been following the US foreign policy agenda, without taking into account the deprecations.

Dawn has rightly highlighted the need for serious deliberations because of the threat of a catastrophic conflict between the US and Iran looming larger over the region. It is encouraging that the incumbent government appears to be making a considerable diplomatic effort to defuse simmering tensions between the two countries.

On last Friday, Iranian Foreign Minister Javad Zarif concluded his two-day trip to Pakistan with an encouraging message from Pakistan’s civil and military leadership — that maximum restraint must be exercised in the prevailing situation as any conflict in an already volatile region could threat global peace and stability. Zarif expressed his satisfaction with Pakistan’s view that US pressure on Iran was unjustified. Pakistan’s Foreign Minister, Shah Mehmood Qureshi also emphasized the need for a resolution of the crisis through dialogue.

It is evident from Zarif’s comments as well as Prime Minister Imran Khan’s earlier visit to Tehran that the incumbent government is making an effort to avoid taking sides. It is by no means an easy situation, given Pakistan’s relationship with Saudi Arabia and the United Arab Emirates (UAE), both have been generous in extending monetary support to Pakistan. The situation becomes even more difficult to handle, when there is internal and external pressure.

In 2015, parliament’s decision against sending troops to support the Saudi-led intervention in Yemen was a brave step but the current scenario could test the limits of that position. Pakistan’s relationship with Saudi Arabia runs deep. The countries also enjoy strategic and military cooperation. If the warm reception and vows of solidarity during the Saudi crown prince’s February visit are anything to go by, it will not be easy to stay neutral in the face of a request for support from Riyadh.

In this situation, the guiding principle should be to resist any external pressure in the best interest of the country as well as the region. Pakistan has successfully avoided supporting any side during Iran-Iraq war and the ongoing Yemen conflict. Therefore, Pakistan must remain steadfast in protecting its own interests, while making the best efforts to resolve the conflict between the two Muslim countries.

Islamabad should use whatever little influence it has on Iran to demonstrate that it (Iran) is not directly involved in the Yemeni conflict. Or, if the OIC countries push for a strong anti-Iran stance, Pakistan must articulate its position in a way that is not offensive, while pointing out that the ultimate beneficiary of a war would be Israel. A diplomatic approach would involve a proactive move to counsel its warring allies and make note of positive statements coming from Washington or Tehran.

With strained relationships with two of its immediate but hostile neighbors, India and Afghanistan, Pakistan cannot afford another war in the region. If US-Iran conflict breaks into war, it could put Pakistan’s security into serious jeopardy.