Iran -US conflict and it’s Impact on India.

The US and Iran are at loggerheads since the 1979 Islamic Revolution, which witnessed the overthrow of the Shah, an American ally in the Middle East, and brought Iran under a clerical regime antagonistic to the US and its involvement in regional politics.US sanctions in the 1980s and 1990s were intended to check Iran’s regional activities and compel it to cease support for terrorism. After the discovery of Iran’s clandestine nuclear programme, the US focus shifted to preventing Iran from acquiring nuclear weapons. Thus, the Iran Non-proliferation Act (later renamed Iran-North was enacted to prevent transfer of material and technology that can help Iran acquire weapons of mass destruction (WMDs). But despite US sanctions, International Atomic Energy Agency (IAEA) reports detailing Iran’s violation of the Non-Proliferation Treaty (NPT) was signed in 1970, and UNSC resolutions imposing sanctions, Iran continued to pursue and expand its nuclear programme. The statement of Iranian leaders on various occasions that their nuclear programme is only meant for civilian purposes and that the country is not developing nuclear weapons did not convince the US and the international community of Iranian intentions, especially as Tehran continued to drag its feet on opening all its nuclear facilities for inspection by the IAEA.

In 2015, the P5+1 and Iran signed the JCPOA to restrict Iran’s nuclear enrichment activities and prevent Tehran acquiring nuclear weapons capability in the immediate future.Subsequently, UNSC resolution  endorsing the JCPOA and affirming that full implementation will lead to the lifting of economic sanctions was signed.

On May 08, 2018, President Trump announced the decision to withdraw from the deal, accusing the Iranian regime of pursuing a regional agenda of harming core US interests in the Middle East. Announcing the decision, President Trump termed the Iranian regime as “the leading state sponsor of terror” and argued that Tehran “exports dangerous missiles, fuels conflicts across the Middle East, and supports terrorist proxies and militias such as Hezbollah, Hamas, the Taliban, and al Qaeda.” He also termed the JCPOA as “defective at its core” since it would have allowed Iran to eventually acquire nuclear weapon capability even if Tehran were to fully comply with its provisions.After withdrawing from the JCPOA, the Trump administration reimposed economic sanctions on Iran including on its export of crude oil which came into full effect on November 05, 2018. However, a waiver was offered to eight countries on importing Iranian oil for 180 days, which came to an end on May 02, 2019.

India-Iran Relations

India has strong bilateral relations with Iran. In addition to cultural and historical links, the two countries look at each other as important regional actors who have contributed positively to stability in their respective regions. New Delhi and Tehran have maintained robust political engagements since the 1990s. During his visit to Iran in May 2016, Prime Minister Narendra Modi and President Rouhani had agreed to strengthen the relationship drawing upon historical linkages and geographical proximity. The same sentiments were reflected when President Rouhani visited New Delhi in February 2018. At the moment, the core of the relationship lies in strong bilateral trade, crude oil imports from Iran and cooperation in the development and operationalisation of the Chabahar Port.

IMPACT ON INDIA

 INDIA imported 84 per cent of its crude in the last financial year, government data show, and two of every three of those barrels was sourced from the conflict-prone region. A major war in the Middle East threatens to push up consumer prices, widen the nation’s external deficits, and potentially derail Prime Minister Narendra Modi’s bid to revive flagging economic growth.
Every $10 increase in the price of a barrel of crude widens India’s current-account deficit by about 0.4 per cent of gross domestic product, said Sonal Varma, chief India economist at Nomura Holdings Inc. The country is already struggling to replace Iranian barrels lost due to US sanctions, she said.

The bulk of traffic from the Strait of Hormuz heads for Asia, including India. What is worrisome is the fact that more than 50 per cent of India’s imported oil passes through the strait. According to data released by Directorate General of Commercial Intelligence and Statistics (DGCI&S), out of the total 207.3 MT (Metric Tons) of crude oil imported in 2018-19, 46.61 million tonnes was imported from Iraq, 40.33 million tonnes from Saudi Arabia and 29.9 million tonnes from Iran. The rest of the imports are from the UAE, Venezuela,  Nigeria and the United States.

If the strait is chocked and trade is stopped, tankers carrying oil to India might be forced to navigate via the longer and dangerous Gulf of Aden route, raising the cost of imports considerably.

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