1059 GMT May 26, 2019
The latest tranche of US sanctions targeting Iran's oil exports and transactions between foreign financial institutions and Central Bank of Iran may hurt the economic interests of major buyers of Iranian oil.
Washington granted temporary waivers to eight countries, including India, allowing them to buy quantities of Iranian oil. India also secured a waiver on its investment in Iran's Chabahar port, being developed by New Delhi as an entrepôt for expanding its trade with Iran, Afghanistan and Central Asian republics.
As the United States withdrew from the Joint Comprehensive Plan of Action, JCPOA — hailed as an achievement of multilateral diplomacy — it once again turned to the great power style of dealing with countries on a bilateral or case by case basis, where it wants to exert pressure.
After denying 'blanket waivers' to European business operating in Iran, the US approach in granting waivers is about giving countries more time to wind down import of oil from Iran, while also avoiding disrupting global oil markets.
Notwithstanding New Delhi's assurance to Iran that "it follows only UN sanctions and not unilateral sanctions by any other country", it had to find its way around secondary US sanctions, which can punish third-country business entities doing business with Iran by limiting their access to American financial network.
Early on, India decided to get in touch with the European Union, which was working to create a Special Purpose Vehicle (SPV) that would sidestep the US financial system by providing an EU intermediary to handle trade with Iran. But the slow progress on operationalizing the SPV and the sharp opposition of the United States to the initiative, denounced by Secretary Pompeo as "one of the most counterproductive measures imaginable for regional and international peace and security", seemed to have pushed India to seek a better understanding with the United States.
In the first week of October, the state-run refiners Indian Oil Corp. Ltd. (IOC) and Mangalore Refinery and Petrochemicals Ltd. booked Iranian oil for the month of November.
Many saw it as India's willingness to defy US pressure, but the reduction in volume was also an attempt to secure a waiver.
India and the US had reached a compromise whereby India would be allowed to import Iranian oil, securing its vital economic interests. India will make the complete payment for its Iranian oil imports in an escrow account set up in UCO bank in India, and Iran will have to spend down that amount to pay for its imports from India.
The US Treasury's decision to exempt Indian investment in Iran's Chabahar port is hardly surprising, given President (Donald) Trump's South Asia strategy, announced in August last year, strongly exhorted India to play a bigger role in Afghanistan, especially in the field of` economic assistance and development.
The rail link between Chabahar and Zahedan on Iran-Afghan border was also exempted from the sanctions.
This rail link is to be extended to Mashhad in eastern Iran and thereafter to Central Asia, and is crucial to the trade and transit corridor that would operationalize the potential of the Chabahar port.
Now that eight countries have secured waivers to import Iranian oil seem to suggest that repeated declarations by Trump administration to reduce Iran's oil revenue to zero were more a tactic to create an atmosphere of uncertainty within which waivers negotiations would have to take place.
The fact that all the major buyers of Iranian oils are economic heavyweights of Asia, who share the cause of safeguarding free and open international order threatened by Trump's America first approach, is reflective of an ongoing global transition in which regional powers have increasing space to shape the world.
*Deepika Saraswat is a research fellow at the Indian Council of World Affairs.