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Clintons' visit and India's dilemma

 Vijay Merchant

Trade ties between India and Iran are likely to degenerate with the probability of India succumbing to the U.S. pressure to curb its crude oil imports from Iran increasing with Hillary Clinton's visit to India. The U.S. Secretary of State, Hillary Clinton, on her visit to India, has lauded the steps taken by India and its refineries to coerce Iran into halting its nuclear developments through cutting oil imports from the Organization of the Petroleum Exporting Countries' (OPEC) second largest oil exporter. At present, India imports 17.5 million mt of Iranian crude oil. This figure is likely to go down to 14 million mt by 2013 with the European Union's embargo coming into effect in July 2012. Iranian crude oil imports are estimated to fall by about 25 percent in 2012-2013.

Thus far, India had been reluctant to sever trade ties with Iran despite the sanctions imposed on Iran by the European Union and the threat of facing sanctions itself. India along with China is one of the largest investors in Iran's energy sector and one of its largest importers of crude oil. Following the U.S. decision to impose sanctions on countries importing crude oil from Iran in February 2012, the energy‐hungry India started exploring other options to pay Iran for its crude oil. Those options included using the Indian currency to purchase Iranian oil on the lines of a previous arrangement with Russia. Moreover, even gold was considered as a medium of payment for Iranian oil.

China and Russia have been trying to promote the usage of their national currencies in place of the U.S. dollar for purchasing oil. Recent market reports indicate that Unipec—a subsidiary of the Chinese state‐owned oil firm Sinopec—was buying Iranian crude oil through a trading unit called Zhuhai Zhenrong.
Clinton's visit to India is primarily to persuade the country to further reduce its crude oil dependence on Iran in order to dent Iran's Energy sector and force Iran to stop its nuclear activities. Iran still maintains that its nuclear programme is solely intended for civilian purposes and not for developing nuclear weapons.
India depends on Iran not only for energy and other trade but also for strategic access to Central Asia. On the other hand, India cannot entirely dismiss the United States' proposal because of the tremendous amounts of trade and strategic interests shared by the two countries.

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