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oil crisis

There is heightened tension over the The truth is that ing. The US had granted exemptions to
recent attack on two Saudi Arabian oil China, India, Italy, Greece, Japan, South
tankers off the coast of the United Arab Indian oil importers Korea, Taiwan, and Turkey to ensure a
Emirates (UAE) and the kingdom’s land well-supplied oil market.
installations by unidentified groups, have already stopped Saudi Arabia is the second-largest
leading to a sudden spike in crude oil placing orders supplier of crude and cooking gas
prices of about 3 per cent. The build-up to India. India imported 36.8 million
has picked up further momentum as for Iranian oil in tonnes of crude oil from Saudi Arabia,
the United States assembled military compliance with the accounting for 16.7% of total imports
assets in the region, aiming to pin down in 2017-18. The UAE accounts for 6% of
Iran. An end has accompanied this to U.S. diktat on “zeroing India’s crude imports, with Adnoc, the
the waiver granted to eight countries, out” imports. India world’s 12th-largest producer, being
including India and China. the only foreign energy company to
Iran has matched some of the rhet- had been importing partner India’s strategic petroleum
oric with threats that it would close about 10% of its oil reserves programme. People familiar
off the Strait of Hormuz to trade and with the developments said the US is
treat the U.S. carrier as a legitimate requirements from Iran working with Saudi Arabia and UAE to
“target” if it came anywhere close to ensure that there is no crude shortage.
Iranian waters. Making matters worse, India has also been sourcing crude
it is clear that the U.S. aims to pin on from the US. It sourced 2.75% of its total
the Iranian government and military affected in the region meet urgently, as oil requirements from the US during
forces blame for attacks on two Saudi well as unitedly express concerns over the April-January period.
Arabian oil tankers over the weekend. a possible U.S.-Iran clash. Supply worries are a major part of
U.S. National Security Adviser John India is trying to leverage its robust the problem. This is particularly true
Bolton’s remark that “any attack on ties with West Asian crude oil produc- for India, as the Iranian crude came at
United States interests or those of its ers such as Saudi Arabia, Kuwait, and a discount on the price as well as lower
allies will be met with unrelenting the United Arab Emirates (UAE) to cost of shipping, insurance and with a
force” gives the impression that the source additional volumes at terms longer credit period. There may still be
ground is being prepared by the U.S., similar to those of its annual contracts a small window available for getting
aided by Saudi Arabia and Israel, for an in a bid to avert any sharp rise in its crude as part of a rupee trade with Iran,
escalation. domestic oil prices. but there is no guarantee that such sup-
Given the signs of a gathering storm, India, the world’s third-largest oil plies could escape the prying eyes of US
India must consider not only its own importer, is in discussions with oil pro- surveillance.
interests in terms of its ties with Iran ducers in West Asia as well as in other Nearly a third of all crude flow hap-
and with the U.S. and its allies but also geographies to procure a total of about pens through Iran’s strategic Strait of
its position as a regional power. Exter- 15 million tonnes of extra crude over Hormuz, which Tehran has been using
nal Affairs Ministry comment that the the year to urgently bridge a supply gap as a bargaining point in its tiff with the
government would take a decision on that will be caused by the exit of Iran US. As US President Donald Trump
Iranian oil imports after the elections from its energy basket. India’s attempt announced walking out of the nuclear
appeared to be an attempt to buy time. to boost crude supplies from the Gulf deal with Iran unilaterally, there have
Now when Narendra Modi govern- nations also comes at a time when been apprehensions of Tehran trying to
ment has stormed back to power, the they plan to increase their investments disrupt traffic through the channel. For
decision will be coming any day. in India. Crude purchased under the the time being New Delhi has nothing
The truth is that Indian oil importers annual contract terms would be more much to worry about its inability to
have already stopped placing orders for lucrative for India than under spot con- access Iranian crude as it has diversi-
Iranian oil in compliance with the U.S. tracts. Such contracts would also allow fied the supply sources. India has a
diktat on “zeroing out” imports. India for purchasing additional quantities of strategic partnership with the UAE,
had been importing about 10% of its oil crude at similar terms. which supplies about 6 per cent of its
requirements from Iran. One immedi- India is a major importer of Iran crude imports. Should things come to
ate priority is to work more closely with oil and imported 23.5 million tonnes a crunch, Abu Dhabi has secured its oil
European countries in ensuring that in 2018-19 from the country. India is exports by building a strategic pipeline
Iran does not feel compelled to walk one of the top consumers of the Or- to the northern emirate of Fujairah,
out of the nuclear deal and to jointly ganization of the Petroleum Exporting opening up a new supply route to the
build a sanctions-immune financial Countries (Opec) accounts for about Indian Ocean bypassing Hormuz.
infrastructure to facilitate Iranian 40% of the global output. Saudi Arabia
trade. It is necessary that the countries is a prominent member of the group- letters@tehelka.com

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