“We have told the Indians consistently, as we have told every nation, that on 4 November, the sanctions with respect to Iranian crude oil will be enforced,” said US secretary of state Mike Pompeo on Thursday, following the first round of India-US 2+2 talks that also involved US Secretary of Defence Jim Mattis, Minister of Defence Nirmala Sitharaman and Minister of External Affairs Sushma Swaraj.

Earlier this year, the US made the announcement that the first set of sanctions on countries importing commodities from Iran would take effect on 6 August and the rest, notably in the petroleum sector, following a 180-day “wind-down period” would come into effect on 4 November.

Given the massive amount of oil India imports from Iran — Iran became India’s second-largest exporter of oil in July, Washington’s demand was always going to be tricky to comply with. Considering India also has other interests in Iran, primarily, the Chabahar Port, it seems even less likely that India will comply.

“We will consider waivers where appropriate, but it is our expectation that the purchases of Iranian crude oil will go to zero from every country, or sanctions will be imposed,” Pompeo said after the conclusion of the 2+2 dialogue. This statement essentially leaves India with some wiggle room.

India has been reluctant to halt all oil imports from Iran and as The Economic Times noted, giving up this cheaper option will be tough when retail prices of fuels are at an all-time high. New Delhi is seeking ways to maintain its bilateral ties with Tehran. Official sources, cited by IANS, said India is discussing with European Union members to find a way out, apart from trying to convince the US that its economic sanctions on Iran following America’s withdrawal from the Iran nuclear deal will have negative implications for the Indian economy.

For India, the shipping costs from Iran are minimal in comparison to the US and it also offers a longer credit repayment period. India is, therefore, attempting to keep the Iranian oil flowing and has also allowed its state refiners to use Tehran’s tanker and insurance cover after western and Indian shippers started winding down their Iran operations ahead of the 4 November deadline.

Iran has also decided to hand over Chabahar port to an Indian company within a month for operation as per an interim pact. The port is increasingly seen as a counter to Pakistan’s Gwadar Port located at distance of around 80 kilometres from Chabahar. Under the agreement signed between India and Iran earlier, India is to equip and operate two berths in Chabahar Port Phase-I with capital investment of $85.21 million and annual revenue expenditure of $22.95 million on a 10-year lease.

Iranian Minister of Roads and Urban Development Abbas Akhoundi said that the US sanctions would not halt oil sale to India while adding that both sides will find out some way to carry on their relationship. “We hear from the Indian side that they are already committed to buy the crude oil and we are also committed to continue our trade relationship with India and buy rice and other food material and also industrial material from the Indian side,” he added.

The India-led development of the Chabahar port may fizzle out if the billions of dollars in annual oil trade is reduced significantly, according to this Livemint article. Chabahar is also an opportunity for India and Iran to expand their bilateral relations beyond oil trade.

Akhoundi also pointed out that while the US has made the trade between India and Iran uneasy, it cannot halt the relationship between the two countries. He also said that Iran welcomes Indian firms developing the giant Farzad-B gas field in the Persian Gulf nation while adding that Indian side is very keen to invest there.

While the US has recognised that some countries are in a place where it takes a little bit of time to unwind, Pompeo elucidated Washington’s expectation that the purchase of Iranian oil be cut to zero from every country.

He said, “So we’ll work with the Indians. We committed that we would do that. Many countries are in a place where they – it takes a little bit of time to unwind, and we’ll work with them, I am sure, to find an outcome that makes sense.” His offer of “waivers where appropriate” will likely come in later to balance India’s demands with those of Trump’s. It, however, remains to be seen what US wants in exchange for the waivers.

Source » firstpost