India imports more than 85 per cent of its crude oil, making it the world’s third largest oil importer. Majority of this oil, which is secured of the Gulf region transits through the Strait of Hormuz to reach New Delhi. (REUTERS/Representational)
President Trump’s announcement, which after the talks with Iran in Pakistan collapsed last weekend, left many confused. Because, he’d just pulled the same move for which he was angry at Iran.
After telling reporters that he “did not care” if Tehran was ready for another round of negotiations, the infamously mercurial Trump gave approval for the US Navy to blockade all ships trying to enter or leave the Strait of Hormuz.
The Iranian blockade of the strait has already triggered a global energy crisis and sent markets crashing as oil prices surge.
While the US military’s Central Command (CENTCOM) clarified that only the ships transiting to and from Iranian ports will be impacted, the American blockade poses another set of problems for the world, especially India.
How will Trump’s blockade impact India?
India imports more than 85% of its crude oil, making it the world’s third largest oil importer. Majority of this oil is from the Gulf region and transits through the Strait of Hormuz to reach New Delhi.
However, with Iran’s blockade, India saw a major disruption in its supply chain. Due to decades-old diplomatic ties with Tehran, many India-flagged vessels and other ships bound for India were allowed to pass.
The Hormuz chokehold also prompted India to restart its purchase of Russian oil, after “due permission” from Washington.
While the aim of Trump’s blockade is to further cripple Iranian economy, the country has still managed its exports, with India being one of the countries to receive Iranian oil during the war with US and Israel. China is already a big buyer of Iran’s oil; and it’s not clear of the US would want to escalate the war by hitting any China-bound ships.
However, reports of Iran collecting a toll from ships has particularly upset Trump. Two large Chinese state-owned tankers carrying Iraqi and Saudi oil had proceeded through the strait on April 11, before the US blockade; as did a Liberia-flagged tanker. While no confirmation came from the two nations, it was reported that they paid a fee for safe passage under Iranian escort.
A country that did not pay a fee for its ships and tankers to transit was India. New Delhi has stated that it did not pay a fee to get its ship through and it was a good relations with Iran which allowed their movement. The Iranian envoy in New Delhi said this too. Thus, in addition to the Chinese and Liberian ships, an India-flagged LPG vessel Jag Vikram also crossed the Strait of Hormuz on April 11.
India can once again turn to Russia for crude oil, but the US waiver which allowed the resumption of these purchases expired on April 11. Reports said India has sought an extension, though nothing has been said officially.
Unless the “permission” is extended, India’s purchase of Russian oil would impact its ties with Washington, especially as it recovers from the previously 50% tariff rate imposed by Trump. That is now down to 10% as a US-India trade deal is also in the works.
India maintains stance on no shortage
In an inter-ministerial cabinet briefing on Monday, the Ministry of Petroleum and Natural Gas stated that the Narendra Modi government has ensured 100% supply for domestic LPG and PNG, and CNG (transport).
Within the first days of the US-Israel and Iran war, India announced it would be prioritising domestic LPG use, with commercial usage being focused towards hospitals and educational institutions.
The government, on Monday, added that no dry-outs have been reported across India at LPG distributorships. Prices, however, have peaked for several users who buy from the gray market in particular.
