India has fallen in line with the Trump administration’s diktat of stopping all oil imports from Iran from May 2. Unfortunately, it is an unabashed violation of the country’s sovereignty. It was quite a spectacle. A few days ago, the Iranian foreign minister, Mohammad Javad Zarif, came with folded hands imploring Union External Affairs Minister Sushma Swaraj to continue oil imports on mutually beneficial terms. The answer he got: a decision will be taken by the new government, post-May 23.
The US is currently engaged in a dangerous game of international dominoes and has declared its intent to topple the ‘unfriendly’ regimes of both Iran and Venezuela. Oil is the strategic weapon in this game of regime-change. With India being a major oil importer – over 30 per cent of our imports in value is of oil, and 80 per cent of our oil is imported – we are facing the rough end of the stick.
The arm-twisting started last May after Donald Trump withdrew from the 2015 nuclear agreement with Iran and imposed sanctions against it. This included pressure on third countries like India and China to stop importing Iranian oil. As a compromise, India and others agreed to taper off imports to ‘zero’ by November 2. There was a further breather that allowed imports to go till May 2 this year.
Earlier, the arm-twisting was about Venezuelan oil. In March last, a Venezuelan envoy in the US complained to Reuters that US was forcing India to stop imports. In February this year, India imported 2,97,000 bpd of crude from Venezuela directly. With India being the second largest purchaser of Venezuelan crude after China, it was a vital source of cash for the left-wing Nicholas Maduro government.
The pressure worked. By mid-March, Reliance Petroleum, that accounted for 80 per cent of India’s crude imports from Venezuela, saw the writing on the wall and agreed to cap its imports. It also said it had halted selling diluent to Venezuela.
CHINA FIGHTS BACK
Trump’s trade fight with China, however, evoked a different kind of response. For over a year now, the US administration has been putting the screws on China, insisting on raising tariffs from the existing 10 per cent to 25 per cent on Chinese goods worth $300 billion entering the US. Trump’s questionable rationale is high tariffs are good since it forces China to pay money to the US government. By May 13, these imposts were put in place on about 3,800 items, including $43.2 billion worth of smartphones and $37.5 billion worth of laptop computers.
China was not slow in hitting back. It announced almost immediately on May 13 that it was imposing additional tariffs on $60 billion worth of US goods covering 5,140 items, and coming into effect from June 1. All this has led to pain both for Chinese as well as American businesses and has sent international stock and oil markets on a deep plunge.
The Chinese also decided to cock a snook at Trump by ignoring threats to stop oil imports from Iran. Chinese oil tanker ‘Pacific Bravo’ was the first to break the May 2 embargo. It loaded 2 million barrels of oil from Soroosh and Kharg terminals in the Persian Gulf, and headed for China. The immediate goal of the Trump administration is to see the Chinese economy tanking. By increasing tariffs on Chinese goods, fewer Americans will buy its products, ensuring foreign companies will leave China and set up shop elsewhere. The longer strategic role is to beat back China and Russia as possible market competitors and restore the role of World Policeman to the US.
From the assassination of Patrice Lumumba, the first President of the independent Democratic Republic of Congo in 1961, to the killing and overthrow of the left-wing Salvador Allende, President of Chile, in 1973, there is a thread of US foreign policy that runs through all these decades. Even the debacle of the US’ world policing in Vietnam in the 1970s did not serve as a lesson, and now we have Iran and Venezuela as US’ new staging points.
For India, there are lessons to be learnt from China. We should stop Trump’s bullying. Iran and Venezuelan oil is cheaper and come on 60 days of credit, which is not offered by the other suppliers – Saudi Arabia, Kuwait, Iraq, Nigeria and the US.
Unfortunately, that’s not how it works. India is trapped in a web of trade deals and is part of an international axis with the US. It does not have the clout to stand up as does China. More immediately, Trump has threatened to end preferential trade treatment for India that allows duty-free entry for up to $5.6 billion worth of exports to the US. Colonialism ended with 1947, but the challenges of ‘neo-colonialism’ are proving to be more difficult.