The next move in the ongoing geopolitical chess match between the United States and Iran is set to take place this Wednesday when US officials will try once again to get their Indian counterparts onboard with the “crippling” sanctions regime championed by the US.
India's continuing purchase of Iranian crude oil remains a
major impediment to the “crippling” part of those sanctions. By cutting Iran off from the global crude oil
markets, the United States is hoping to put enough pressure on Iran to get them
to give up their nuclear research program (folks in Washington also really,
really hope that the sanctions will lead to the unlikely event of the
Iranians overthrowing their government due to the negative impact a lack of oil
sales will have on their economy). While
the European Union is phasing in a ban on Iranian oil, plenty of Iranian crude
is flowing to China and India; making the sanctions painful, but survivable, at
least in the short-to-medium term.
Even the optimists in Washington will admit they can apply
little leverage to get China to abandon their Iranian oil purchases, but they
hope that India could be swayed. So far
India has maintained that they need to continue to buy Iranian oil since many
Indian refineries are configured to process specific types of crude that come
out of Iran and that there aren't substitute volumes readily available on the
global market. India has also questioned
the validity of the US sanctions since they are not backed by the United
According to the Indian publication Business Today,
Wednesday's meeting is likely to focus on the US suggesting that American shale
gas could be a substitute for Iranian crude oil. This is interesting for a couple of reasons:
first we're talking about replacing oil with natural gas, which would mean a
massive restructuring of India's energy mix – a drastic shift away from crude
oil products to natural gas (using natural gas as a vehicle fuel for example,
instead of gasoline); and since the US currently lacks a liquefied natural gas
(LNG) export infrastructure, it would be a number of years, at least, before
large volumes of US shale gas could be heading to India in a best-case
scenario. How India would get by in the
meanwhile without Iranian crude oil imports is an open question.
If accurate, the Business Today report points at
American officials desperate to get their Indian allies onside with the Iranian
sanctions regime. According to the
sanctions passed by the US Congress, the United States could levy
penalties against any country trading with Iran in violation of our sanctions,
and while it is hard to imagine the United States fracturing diplomatic
relations with India with such an action, it is also clear that as long as
India (and China) keep importing Iranian oil, it is highly unlikely that the
sanctions will have the desired effect.
Stay tuned for Wednesday's meeting.
3 days ago