iran oil sanctions

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Background:

  • USA has imposed sanctions on Iran which covers Iran’s energy and banking sector and disallowed any countries to deal with Iran in these two sectors
  • USA has granted exemptions to the eight countries including India, China, Italy, Japan, Turkey, South Korea, Greece, Taiwan from the sanctions.
  • US has also said that these two Asian giants, China & India, will have to bring down their Oil purchases from Iran to zero as soon as possible.
  • Present waivers are given for a period of 6 months. If India is not able to cut down its imports till May 2019, then US will review it and take necessary actions.
  • Presently, Iran is the 3rd largest oil supplier for India while Saudi Arabia is on 2nd place and Iraq is on the 1st place

   Indian Iran relationship:

  • Chahbahar Port constructed by India in Iran for direct access to Afghanistan. Due to strain relationship between India & Pakistan, Pakistan is not allowing India to enter into Afganistan directly.
  • International North-South Transport corridor was signed in 2002 by Iran, Russia and India. This is 7200 km multi-mode network of the ship, rail, and road route for moving freight between India, Iran, Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, and Europe.

Why way-off

  • Suppose, if these eight countries would not have been given the waiver then the oil prices in the international market would have gone up which adversely affect the U.S consumers as well. So it can be said that waiver to these eight economies is done for U.S interest.

Impact of Sanctions on the Iranian Economy:

  • Iran is now under tremendous pressure because Iran is exporting nearly 2.5-2.6 million barrel of oil per day. After sanctions, it will be down to nearly 1 million barrel of oil per day, within six month
  • Not only export of Iran has come down but also the currency is also under pressure. The Iranian has lost its Currency value nearly 70% of its value.

U.S.A wants to reduce the exports of Iran so that the Iranian economy comes to such situation that it will be forced to come to negotiate on the USA and its allies (Israel, Saudi Arabia) terms.

See also: Why is Indian currency falling

  Impact on Global Oil Market:

  • Iranians have said that if they cannot send oil through Strait of Hormuz then they might do something to it and as a result, Oil prices start rising in the world which increases the inflation rate as well. Strait of Hormuz is a passage which connects Indian ocean with the Persian Gulf which facilitates 30-35% of Oil trade.

  • The Strait of Hormuz separates the modern Iranian state from the countries of Oman and the United Arab Emirates, which have strong defense connections with the United States and Saudi Arabia and all the world’s Oil importers- including the U.S.A depend on this secure passage for their Oil imports.

Way forwards

  • Turkey has been also getting the waiver to import Oil from Iran as far as Saudi Arabia & Israel is concerned they will continue to apply the pressure on U.S.A so that they don’t take their eyes from the ball and much will also depend on U.S elections.

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