Sunday, January 8, 2012

India need to handle Iran situation carefully.

In the first week of Jan, this year when the state TV of Iran informed its viewer’s  that India has cleared all payments for oil imports from Iran, citing Ahmad Qalebani, the managing director of National Iranian Oil Co., it was hinting at likely near future troubles for both the countries.

Iran seems to be on the way of Iraq. West  is tightening its screws on Iran,  a strategic  supplier of Indian petroleum.  US and UK   would  like to cut the financial sources first. India has enjoyed friendly relations with Iran for a long time. So was Iraq, but Indian government had failed to exercise diplomatic efforts to get help for itself or Iraq.

Iran supplies roughly 11% of our crude oil requirement. The problem will arise due to payment arrangements between the two countries. Payments for this oil have to be made through third countries. Currently, these are routed through Turkey. This system may not last and a situation can arise when payments become impossible.  As Turkey will follow the directions given by UK. According to  Qalebani, “India and Iran don’t face any problem on payments.” But the future may not be so smooth for both the countries unless a strong understanding and trust is built.

For India finding other suppliers for such volumes of oil is not difficult, but these options will be surely more expensive. The spot prices in the international market will soar up as the crisis will deepen. To address the problem  some diplomatic efforts are on . An Indian official team is visiting Tehran later this month to discuss this issue. Too much hope should not be placed on such meetings as a part of the problem is outside the control of the two countries.

Learning from the experiences of past India should deliberate the diplomatic and strategic options in advance  so that some breathing space is available even if a war like situation arises. 

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