US to tolerate India’s Iran trade corridor but demands end to oil imports

US to tolerate India’s Iran trade corridor but demands end to oil imports
Haley has promised US support for India’s plans to develop Iran’s Chabahar as a gateway port to a trade corridor extending to Afghanistan and avoiding Pakistan.
By bne IntelliNews June 28, 2018

US Ambassador to the United Nations Nikki Haley on June 27 told India’s Prime Minister Narendra Modi that Washington would back his country’s plan to develop the Iranian sea port of Chabahar to open up a trade route to Afghanistan that avoids its arch-rival Pakistan.

“We realise we’re threading a needle when we do that,” said Haley on a visit to India, describing the balancing act of ensuring Indian use of the Iranian port while the US simultaneously attempts to throttle Iran’s economy to force it to renegotiate the nuclear deal.

India is the second largest importer of Iranian oil and part of Haley’s visit brief was to try and persuade New Delhi to respond positively to the Trump administration’s call for all countries to from November entirely refuse shipments of crude from Iran. Those that refuse to accept this demand will expose themselves to secondary sanctions as it is unlikely the US will grant any waivers for such imports under its tougher than ever policy towards Iran, State Department officials have said. Not that the Indians are showing signs of falling into line. "India does not recognise unilateral sanctions, but only sanctions by the United Nations," Sunjay Sudhir, joint secretary for international cooperation at India's petroleum ministry, told CNNMoney on June 28 when asked whether India would reduce oil imports from Iran.

"More than [largest importer of Iranian crude China], India is unlikely to capitulate to the US demand," analysts at the Eurasia Group wrote in a note on Tuesday. They estimated that India was currently buying about 700,000 barrels per day from Iran. "India's state-owned refiners will likely continue to import Iranian crude," they said.

On June 27, Turkey’s economy minister made it clear that Ankara does not feel bound by the US hardball demand for countries to cease importing Iranian oil in four months’ time, while China may have an ‘Iran oil lever’ over Donald Trump as it negotiates the outcome of its growing trade dispute with his administration. The day also saw Japan’s Chief Cabinet Secretary Yoshihide Suga tell a news conference that Japan and the US were in talks about the sanctions on Iran, although he declined to reveal details on Tokyo’s probable Iran oil imports policy looking ahead.

India sees Chabahar, Iran’s only oceanic port, as vital to its ambition of shipping goods directly across the Indian Ocean for further transiting across Iranian territory by rail and road to landlocked Afghanistan and Central Asian markets.

The transportation corridor would help to cut Afghanistan’s dependence on neighbouring Pakistan.

“We know the port has to happen and the US is going to work with India to do that,” Haley, the daughter of Indian immigrants, said. “We know that they’re [India] being a great partner with us in Afghanistan and really trying to assist the US and trying to do more. The port’s vital in trying to do that.”

In February, Iran said it had agreed to lease operational control of Chabahar, located on the Gulf of Oman, to India for 18 months.

China has also expressed some interest in using Chabahar for some of its export flows but part of the rationale for India developing the port is to develop a rival to the Pakistani transit port of Gwadar, which China is developing to further its own trade ambitions for Pakistan, Afghanistan and Central Asia. Gwadar, on the shore of the Arabian Sea, is located just 90 km from Chabahar. 

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