The sanctions on Iran by USA or say economic war between USA and Iran have been in great news from a very long time. So, here in this, we will know about the cause and rise of this cold economic war and its effects on India.
The Reason and Beginning
In 2006, the UN Security Council passed a Resolution which demanded that Iran halt its Uranium Enrichment Program, but when Iran refused to comply then in December 2006 UNSC passed another resolution to impose sanctions against Iran. Initially, U.S. sanctions targeted investments in oil, gas, and petrochemicals, exports of refined petroleum products, and business dealings with the Islamic Revolutionary Guard Corps (IRGC) - “branch of Iran’s Armed Forces”. It encompassed banking and insurance transactions (including with the Central Bank of Iran), shipping, web-hosting services for commercial endeavors, and domain name registration services. Subsequent UN Resolutions have expanded sanctions against Iran.Impact on Iran
Over the years, sanctions have taken a serious toll on Iran's economy and people. Since 2006, the United States has led international efforts to use sanctions to influence Iran's policies, including Iran's uranium enrichment program, which Western governments fear is intended for developing the capability to produce nuclear weapons.Iran counters that its nuclear program is for civilian purposes, including generating electricity and medical purposes.
Joint Comprehensive Plan of Action commonly known as the Iran Nuclear deal or Iran deal, is an agreement on the Iranian nuclear program signed in Vienna on July 14, 2015, between Iran and the P5+1 (the five permanent members of the United Nations Security Council—China, France, Russia, United Kingdom, United States—plus Germany), and the European Union. Under JCPOA, Iran agreed to eliminate its stockpile of medium-enriched uranium, cut its stockpile of low-enriched uranium by 98%. For the next 15 years Iran will only enrich uranium up to 3.67%. Iran also agreed not to build any new heavy-water facilities for the same period of time. Other facilities will be avoided for nuclear proliferation risks. To monitor and verify Iran's compliance with the agreement, the International Atomic Energy Agency (IAEA) will have regular access to all Iranian nuclear facilities. The agreement provides that in return for verifiably abiding by its commitments, Iran will receive relief from U.S., European Union, and United Nations Security Council nuclear-related sanctions.
The Year 2018 and events Timeline
- On 30 April 2018 the United States and Israel said that Iran had not disclosed a past nuclear weapons program- ‘AMAD’- to the IAEA, as required by the 2015 deal.
- On 8 May 2018 President Trump announced that he was withdrawing the United States from the Iran nuclear deal, dismantling the signature foreign policy achievement of President Barack Obama. Mr. Trump said that the United States would reimpose the stringent sanctions it had on Iran before the deal and would consider new sanctions against it. The other countries signed the deal, France, Germany, Britain, Russia and China, said they would remain in the agreement. But Mr. Trump put allies on notice that they would face American sanctions if they did business with Iran, and would have to choose between the United States and Iran.
- In response to this, President Hassan Rouhani of Iran said that his country would continue to abide by the terms of the deal. He criticized Mr. Trump for pulling out of the pact as well as other international treaties.
- On April 8, 2019 Mr. Trump, over the objections of Pentagon officials, announced that he was designating a powerful arm of the Iranian military, its Islamic Revolutionary Guards Corps, as a foreign terrorist organization. The result of this was that Iran’s oil exports fell by more than half, to less than one million barrels a day.
- On May 8, 2019, one year after announcing he was pulling out of the nuclear deal, Mr. Trump placed a new round of sanctions on Iran, targeting the country’s metals industry, its largest source of non-petroleum revenue. Around that time, the Trump administration also hit Iranian oil exports, by effectively ordering countries worldwide to stop buying oil from the country or face sanctions of their own.
- On June 13, 2019, explosions crippled two oil tankers in the Gulf of Oman on Thursday; the United States military released video footage that proves that Iran was behind the attack. After this allegation, crude oil prices rose more than 3 percent, indirectly bolstering Iran’s revenue as an oil producer.
Effects on India
These sanctions have multiplied for India resulting in diplomatic headache. India is increasingly finding itself between a rock and a hard place. India and Iran share historical ties, though this dimension of the India-Iran relationship is often ignored. The two shared common borders until the partition of the subcontinent in 1947. Presently, Iran is India’s third largest supplier of crude oil. However, the India-Iran relationship transcends oil. India, with an investment of $500 million, aims to develop Iran’s Chabahar port as a transit hub for Afghanistan, Central Asia, and the International North-South Transport Corridor (INSTC). Additionally, India is developing two gas fields, namely Farzad-B gas field located in Tehran and the South Pars field located between Iran and Qatar. These projects clearly highlight India’s long-term engagement with Iran.U.S. sanctions would severely stymie the above projects and investments. The sanctions would impact investments in Chabahar as well as Farzad and South Pars oil field. Foreign companies and even Indian multinational companies with operations in the United States or dependent on the American financial system are planning to withdraw operations from Iran with the advent of sanctions. The State Bank of India has already announced it will suspend payment operations in Iran starting from November. Reliance Industries Limited (RIL) too has decided to halt its oil imports from Iran.
Also, there have been attempts by Saudi Arabia and UAE to entice India. Companies like Saudi Aramco and Abu Dhabi National Company (ADNOC) have promised to invest $44 billion — roughly amounting to a 50 percent stake — in Ratnagiri Refinery and Petrochemical Limited (RRPCL).
India should also pay attention to the Chinese dimension. The renewed U.S. sanctions would force Iran to drift sharply toward non-Western powers like Russia and more so toward China. Iran, owing to its geography, plays a crucial role in China’s Belt and Road Initiative (BRI). China could leverage this as an opportunity to further consolidate its hold. China-Iran engagement will undermine the impact of U.S. sanctions and put Beijing on the higher ground vis-a-vis countries like India and the United States. Thus, India needs to carefully asses these situations while formulating its response.
What should India do?- “A suggestion”
India should strongly argue for waivers regarding oil trade (given Iran’s importance to Indian energy security) and critical projects like Chabahar port. The absence of Iranian oil could shoot up prices in the oil market, subsequently raising India’s import bill.India should negotiate with Iran for a rupee-rial system and efforts should be made to revive Irano-Hind, a jointly owned shipping company that was shut down in 2013. Further, India should coordinate with EU countries along with Russia and China to promote the Iran nuclear deal or any alternative arrangement, in case the United States remains firm on sanctions.
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