The U.S. ban on oil import from Iran has put Narendra Modi, the Indian Prime Minister, in a tough spot. On one side, if he agrees on the terms of the U.S., the world’s powerful economy will be in his side. However, he would lose a cheaper supply of oil as well as foreign exchange. Recently, the U.S. president, Donald Trump withdrew from the nuclear deal that was previously signed by Barak Obama, Trump’s predecessor. As a result, Iran crushed foreign investment as investors, which has scared European countries. Now, Trump threatened all those countries, including India, by saying they should stop all oil imports from Iran from November 4 or they would face the consequences of the U.S. sanctions.
Modi’s Dilemma: Iran Or The U.S.
The diktat of the U.S. puts India in a quandary as Iran is not just a cheaper supplier of crude oil, but also a gateway to Eurasia and Afghanistan. The last year’s oil import from Iran totaled was roughly $9 billion. Deal with the U.S. will cost India all the savings on shipping costs and the longest period offered by any of its suppliers. In addition, it will put the country right in the middle of the U.S.-China tread war.
On the contrary, there are some benefits of being on the side of Trump. Modi can soften the issues such as putting India’s name in the U.S. Treasury’s watchlist of potential currency manipulator, who use the exchange rate to increase exports.
The trade war is affecting several countries simultaneously. For instance, for the first time since 2004, Chinese oil prices have dropped significantly owing to the low demand. However, as reported by Times of India, India may get some exemptions on the U.S. tariffs on some products such as steel and aluminum. Abhishek Kumar, a senior energy analyst at Interfax Energy in London, stated, “The future sanctions on Iran offer a sterling opportunity to commercialize the U.S. oil in the oil market. Increasing trade war between America and China may lead to an increase in the U.S. oil import to the Indian market.” If not Iran, Modi has been preparing for alternative oil supplies since the decision of the U.S. to reimpose sanctions on the Persian Gulf state. However, what will he choose is still a mystery.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]