People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 19

May 13, 2012



Toeing the US Line on Iranian Oil


Prakash Karat


THE visit of Hillary Clinton to India was probably her last one as the US secretary of state. But this visit was not meant to say goodbye to her counterparts in the government here. The main purpose of the trip seems to have been to ensure that India falls in line with the plan of the United States to choke off Iranian oil supplies to India and other countries.


The United States has been imposing a series of sanctions against Iran. The latest set of sanctions adopted in late 2011 would stop US companies from doing business with any country that continues to buy Iranian oil through the Iranian central bank. The aim of the sanctions is to cut off Iran’s oil exports and cripple its central bank and economy. The US Congress which adopted this law has provided for the president to exempt from sanctions those countries that make significant reductions in oil imports from Iran.


It should be noted here that the UN Security Council had imposed sanctions on Iran in June 2010 which did not apply to the Iranian petroleum industry or its oil trade. It was the United States and the European Union which have adopted sanctions targeting Iran’s oil industry.


The United States has been pressurising the major importers of oil from Iran such as China, Japan, India and South Korea to reduce their oil imports from Iran.


In March this year, the Obama administration exempted Japan and ten European nations from imposition of sanctions on the basis that they have taken steps to reduce oil imports from Iran. The European Union announced a ban on oil contracts with Iran in January this year. It also announced that all existing contracts would cease by July 1.


India has been one of the major buyers of Iranian oil. The United States has been putting pressure on India for the past two years to cut back on its oil purchases from Iran. India had imported 12 per cent of its oil requirements from Iran in the year 2010. The Mangalore Refineries is one of the biggest customers of Iranian oil sourcing about 7.1 million tons every year.


What has unfolded is the sorry spectacle of the Manmohan Singh government step by step succumbing to the US pressure and giving in to the illegal sanctions. In 2010, the United States warned that Indian companies using the Asian Clearing Union for financial transactions with Iran would be flouting US laws prohibiting international companies doing business with Iranian banks and its oil industry. This led to the Reserve Bank of India curbing transactions with Iran being settled through the Asian Clearing Union. Subsequently, India and Iran tried to resolve the issues of payments for oil supplies through banks in third countries. At first a bank in Germany was doing these transactions. But this stopped after the German authorities stopped these dealings under US pressure. Then a Turkish bank was selected and after some time that arrangement had to be given up.


At present an Indian bank, the UCO Bank is the bank designated for the rupee payments to be made by the Indian oil companies.  However, the Indian government has not permitted an Iranian private bank, the Parsian, to open a branch in Mumbai. Such a branch would have helped in facilitating trade and payments to be made.


The relentless US pressure led to the government directing the oil companies which are importing Iranian oil to reduce their oil intake. As a result the Mangalore Refineries and the Hindustan Petroleum Company have reduced their orders. The Essar company has also cut back their orders.


While this has been going on, the Manmohan Singh government has been officially taking a stand that India’s energy needs require Iranian oil. Finance minister, Pranab Mukherjee on a visit to the United States declared that India cannot cut back on oil imports from Iran.


However, the reality is something different. In 2008-09, India imported 21.8 million tons of oil from Iran.  This came down to 18.5 million tons in 2010-11. In 2011-12, this has come down to around 14 million tons which is a drop of 20 per cent from the previous year.


While the UPA government is adopting an official stance that India cannot do without Iranian oil, at the same time, it is providing assurances to the United States that steps are being taken to cut back on Iranian oil imports.


This is why Hillary Clinton told a Congressional committee in March that India was responding to demands to cut back on oil  purchases from Iran. During her current trip to Kolkata, she commended the steps India has taken to reduce oil imports from Iran.  In Delhi, after talks with the foreign minister S M Krishna, she stated: “I welcomed the progress India is making to reduce its purchases of oil from Iran, and hope to see continuing progress…”.


While Hillary Clinton was in Delhi, a report of the  Congressional Research Service, which is a research wing of the US Congress, was published. It stated that India had significantly reduced its import of Iranian oil from 16 per cent in 2008 to 10 per cent currently.


How the government wilts under the relentless pressure from the United States was also seen in the way the Indian Embassy in Washington reacted to  criticism in the American media and by US Congressmen about India’s continued oil trade and ties with Iran.  A press release from the Indian Embassy in Washington dated March 7, 2012 stated: “Allusions in the media that India’s overall oil imports from Iran are increasing just because its monthly uptake of Iranian oil reportedly increased in January this year are based on selective use of information, misrepresenting the fact that in aggregate terms, crude imports from Iran constitute a declining share of India’s oil imports. Nonetheless, given the imperative of meeting the energy needs of millions of Indians, an automatic replacement of all Iranian oil imports, is not a simple matter of selection, or a realistic option.”


That the US is imposing illegal sanctions against Iran and threatening third countries from doing business with Iran is something which is not objected to by the UPA government.  Even the efforts by India to try and maintain a reduced oil trade in rupees and to get Iran to buy goods and services from India in return, is being attacked by the US Congressmen  and the media.


Hillary Clinton behaved arrogantly in Bangladesh when she lectured the government there about Mohamad Yunus, the Grameen Bank founder, who was removed from the chairmanship of the Bank. She then proceeded to Kolkata to tell Mamata Banerjee about how to settle the Teesta waters issue and to accept FDI in retail. There was no word from the UPA government that what she was doing in Kolkata was out of line.


The giving in to US pressures on Iran by the UPA government goes back a long way.  Ever since the joint statement by president Bush and prime minister Manmohan Singh in July 2005, the UPA government was set on the road to align its foreign policy with the United States.  In September of that year, India voted for the first time in the IAEA against Iran. The Hyde Act passed by the US Congress set out the need for India to cooperate with the United States to isolate Iran.  Under US pressure, India gave up the Iran-Pakistan-India gas pipeline project.  The same Hillary Clinton had explicitly asked India not to proceed with the gas pipeline project with Iran. Right now the Manmohan Singh government is busy behind the scenes, trying to qualify for the exemption from sanctions that president Obama has to grant by end June.  It has to show that it has significantly cut back on oil imports from Iran. 


Iran has been a traditional supplier of oil to India. It has been cheaper to access Iranian oil compared to other countries. The gas pipeline would have also ensured cheaper gas which India desperately needs. Iran is the gateway to Afghanistan and to Central Asia for Indian goods and trade. Yet all this is jeopardised by the anxiety to be on the right side of the United States.


The current episode is a sad commentary on the manner in which the Manmohan Singh government sacrifices the vital interests of the country at the altar of the Indo-US strategic alliance.