By R. Sasankan

Trump-ism is in retreat in the US. In the first hectic weeks since assuming office, President Joe Biden has concentrated his attention on domestic issues and rolled back some of the disagreeable decisions of his predecessor. Having somewhat cleared the slate for his new Administration, he can now turn his attention to the most compelling international issues. One area of great interest for India is the possibility of lifting the economic sanctions that Donald Trump had slapped on Iran and Venezuela. President Biden will review these sanctions and the expectation is that these may be relaxed in the days ahead. In the case of Iran, Biden has to consult European allies as the sanctions are linked to Iran’s nuclear policy.

Donald Trump was perceived to have a friendly attitude towards India and enjoyed a great rapport with Prime Minister Narendra Modi. But that did not stop him from announcing decisions that had hugely adverse consequences for India. Trump was determined to shore up the fortunes of the US shale oil industry, which prompted him to take decisions that hurt India's economic interests. India depends on imported crude oil to meet as much as 84 per cent of its needs. Trump’s sanctions against Iran and Venezuela deprived Indian refineries of their cheapest sources of crude oil. Worse, he arm twisted India into buying costly US crude as a means to narrow the trade surplus that India has always enjoyed with respect to the US. In effect, the policy tightened the taps on crude from the Middle East, India’s traditional source.

So, did President Trump impose sanctions against Iran to promote sales of US shale oil? This is hard to tell and perceptions will always differ. There is no documentary evidence to substantiate this charge that has been levelled by critics of the Modi government. But there is no gainsaying that under Trump, the US emerged as the largest producer of crude oil in the world.

Almost simultaneously, India came under pressure to reduce the trade balance with the US which was heavily tilted in India's favour. The quickest way to rebalance the trade equation was to force India to import crude oil from the US. Thus, India started importing US crude in 2017. Last fiscal, crude oil imports from the US touched 12.5 million tonnes. Imports continue even after the price difference between Brent and the West Texas Intermediate (WTI), which was $ 7-8 per barrel in the initial years of import, shrank to $ 2 per barrel.

India wants predictable and affordable supply of energy. Iran has been meeting this requirement for long. But this source was badly disrupted during the Trump presidency. As a result, India moved very close to Saudi Arabia and further strengthened its relations with the UAE. Iran’s political leadership does not seem to believe in diplomacy: at times, it can be rash and whimsical. Saudi Arabia and Iran are at loggerheads and may continue to be remain antagonistic towards each other.

However, experts believe that a revival of India's trade relations with Iran need not damage Saudi interests.

But any decision by President Biden to lift sanctions against Iran and Venezuela will not happen without some degree of bargaining. The process is currently on. The sanctions may be lifted in one go or could be staggered. Until the US President takes a final decision, there is growing speculation that he might allow select nations to import crude from Iran. President Trump had also granted such a favour to eight countries including India in the first year of sanctions.

As far as India is concerned, Venezuela and Iran are not comparable. Crude imports from Venezuela was primarily conducted by Reliance Industries because its low grade crude, which was very cheap, suited the Jamnagar refinery. So Reliance should be happy if the US sanctions against that country is lifted. India, however, has never had any deep bilateral relationship with Venezuela.

India's traditional ties with Iran go back over decades. Even with India’s expanding ties with Saudi Arabia and the US tilt, a friendly India-Iran relationship is useful to the Americans and Saudi Arabia given that Pakistan is now fully under the Chinese thumb -- literally. India is the only country among the US allies in the Middle East and South Asia that enjoys any standing and a history of cordiality with Iran. So to keep its options open and given the geo-political interests in Central Asia, India should tell the Saudis and the US that a close India-Iran axis would be beneficial to their interests. Turkey, a Nato member, is the only other entry point to Central Asia but that is far more complicated than the route via the Chabahar Port. If India plays its cards right, the India-Iran relationship can be packaged as a strong asset for a strategic US/Saudi partnership. Indian officials and the diplomatic corps are aware of this and are expected to play their cards well.

Trump's policies had hit Indian refineries very hard. Their Gross Refining Margin (GRM) sank to an all-time low. India used to be among Iran’s top oil buyers with imports touching 23.5 million tonnes in FY 2018-19. After the sanctions were imposed, imports from Iran plunged to an abysmal 1.7 million tonnes in fiscal 2019-20. Iran's crude is cheaper than other Middle East crudes by $ 1.5-2 per barrel. The geographical proximity coupled with a credit period of 60 days, which has now been raised to 90 days, make Iranian crude very attractive for Indian refineries.

Put simply, Iranian and Venezuelan crudes were attractive because of the netback they yielded. When refineries again start to import crudes from Iran and Venezuela, Opec's production caps will be less effective in determining the trajectory of crude oil prices. Crude prices are expected to fall once the latest wobble in global prices settle. That can only enhance India's economic interests since it depends so heavily on imported crude.