European Union officials are moving to ask India to further intensify the pressure on Iran to abandon its nuclear program. India, which imports 12 percent of its oil from Iran, has not jumped on the drawdown bandwagon just yet.
To the contrary, sources suggest that together with South Africa, they have already increased their imports of Iranian oil, while China is believed to be chasing a discount in contract terms. Iran’s basic line of defense has been that its oil exports, currently just above 2 million barrels per day, are indispensable to the global market.
Indeed, many Iranian politicians, including the head of the parliament’s energy commission, strongly believe that the EU decision to ban oil imports from Iran is suicidal given the debt troubles in the euro zone. On Wednesday, 200 lawmakers of Iran’s parliament signed a statement supporting a halt in oil exports to the EU before a ban comes into force on July 1.
“In the event of the continuation of the illogical policies of EU leaders, it is only natural that Iran will look for alternative countries to sell its oil to and will not wait for the bloc’s sanctions to take effect,” the document read, according to state-run Press TV.
But no action was taken as Iran's parliament headed into a four-week recess. The “double-urgency bill,” first tabled for discussion shortly after the EU decision on January 23, has yet to be passed. Despite the rhetoric, analysts have told CNBC it’s a tactic that would do more harm to Iran than to the EU. After all, more than 55 percent of government revenue is derived from oil exports.
For the moment, Iran’s policymakers can find solace with others countries eager in picking up some of the more than 500,000 barrels per day of crude originally destined for Europe. They may even be in a stronger position to negotiate a better deal. But German Chancellor Angela Merkel’s recent visit to China, and comments by EU President Herman Van Rompuy, underscore that the sanctions drive is far from over.
Herman Van Rompuy was quoted by the Times of India on Thursday as saying that he planned to “ask Indian leaders to apply their considerable leverage to Iran” and help bring them back to the negotiating table. India is the world’s fourth largest oil consumer, and overtook China earlier this year as the top importer of Iranian crude.
Late last month, the Indian Finance Minister, Pranab Mukherjee, reiterated that Iran was an “important” supplier of oil to emerging markets. And in a bid to maintain ties and circumvent expanded sanctions by the United States, Iran has agreed to accept rupees for 45 percent of oil payments.
Tougher sanctions are having a clear impact, with Iranian buyers defaulting on selected payments for rice and maize earlier this week. The clamp may be tightening, but the real blow to Iran is likely to come only with the help of India and China. If the pace of ramped-up rhetoric and sanctions is any indication, some countries may be unwilling to wait that long to force a change in Iran’s nuclear policy.