US' Iran oil sanctions: Crisis looms for India

The Trump administration's move to back Iran into a corner by ending the sanctions exemption on India, China and six other nations importing Iranian crude on May 2 may serve US and Saudi Arabian interests. For now.

In engineering what it hopes will be the implosion of Iran's economy and the possible end of the hardline regime of spiritual leader Ayatollah Khamenei, instability within Iran could impact an increasingly unstable Middle East, where Iran has long used its oil surplus to fund Hamas, Hezbollah and Houthi militias that tie down Riyadh, and its new ally Israel, in Syria, Lebanon, Iraq andYemen. The Iranian Revolutionary Guards, that oversee almost daily provocations, may up the ante, perpetuating Sunni-Shia conflict.

Therefore, US sanctions, at first glance, may seem to strengthen the Saudi hand in starving the moderate Hassan Rouhani regime of much-needed oil revenues to run the government. But the balance of power will tip inexorably towards the hardliners from Qom, who have been critical of the US-Iran nuclear deal from the start and would like nothing better than to scrap it.

Does the international community really want Iran to go so completely rogue? Does it want to set the stage for a nuclear conflict between arch-enemies, now that Riyadh is suspected of working on building its own nuclear arsenal?

US President Donald Trump may believe he's batting on the side of angels. But with crude prices rising towards $80/barrel, the price the Saudis would like it at before they greenlight the release through Opec of its 1,000,000-barrel reserve, it's not just the American economy that might be hit, but EU and Asia too.

India, scrambling to make up the shortfall when the US sanctions kick in, reached out to Saudi Arabia and the UAE to increasing its supplies while being alive to the perils of not alienating long-time ally Tehran, where investment in Chabahar port (the US has thus far not shut down investment here) and its access to Afghanistan can't be imperilled. A non-dollar payment arrangement with EU and Asian powers like China,  that no longer allows the US to call the shots, may be an imperative, even if the US has stood with India on tagging Pakistan as the home of terror.

In the immediate short term, India's oil refineries must be configured to refine non-Iranian crude. Sanctions couldn't have come at a worse time for Prime Minister Narendra Modi, in election mode, failing to prioritise energy self-sufficiency, and gauge the impact the crude oil price spike will have on an already flailing Indian economy and its domestic fallout.

If Tehran retaliates by shutting access to the Straits of Hormuz and blocks the shipment of oil from and to ports up and down the Persian Gulf, India — and every other nation in the world — will be faced with a crisis that has Donald Trump’s signature all over it.