India cannot wean itself off Iranian Oil overnight

Today, India’s oil imports from Iran comprise roughly 10 percent of the country’s overall intake and that number continues to decline.

ADVERTISEMENT
In fact, India’s oil imports from Iran have dropped by 15 percent since fiscal 2009. In fiscal 2010, India imported about 21 million tons of crude from Iran. Last year, it imported only 18.5 million tons. About one million tons less will be imported this fiscal year.

This decline is squeezing Iran’s access to hard currency and thus reducing its ability to use those funds for its nuclear program.

But despite what the critics say – or hope – India cannot simply snap its fingers and immediately eliminate its Iranian oil imports. Indeed, any significant cutback in Iranian oil imports would produce serious negative consequences for the Indian economy and its people. A major disruption in oil supply would have a significant economic ripple effect across the country. It would increase prices steeply on a wide range of products and would thus be devastating for the Indian people whose lives and livelihoods depend even indirectly on that oil.

U.S. consumers would also be hurt if the global price of oil rises.

Many of India’s large oil refineries are specifically designed to handle the very type of light crude that Iran supplies. So importing oil from another country would also require major investment in new infrastructure. All of this would take time.

India and Iran are regional neighbors who have enjoyed strong cultural and economic ties for decades. Let’s not forget that India – like Iran – is home to a large Shia population and that Iran serves as a critical gateway for India to Afghanistan and Central Asia.

India has been a strong ally to the U.S., Europe and the world in the fight against nuclear proliferation. It has consistently adhered to multilateral sanctions against Iran and has voiced its opposition to Iran’s nuclear program in its votes before the International Atomic Energy Agency.

While India believes – as its leaders have stated publicly time and again – that Iran has the right to a peaceful nuclear energy program, but that it must also fulfill its obligations under the Treaty on the Non-Proliferation of Nuclear Weapons to prevent the spread of nuclear weapons and promote the peaceful use of nuclear energy.

On Feb. 6 before the Center for Strategic and International Studies, India’s Foreign Secretary Ranjan Mathai spoke about India’s reduced dependency on Iranian oil. Mathai said India’s relationship with Iran is “neither inconsistent with our non-proliferation objectives, nor is it in contradiction with the relationships that we have with our friends in West Asia or with the United States and Europe.”

He’s right.

Talks have resumed again this month in Turkey between global superpowers and Iran on Iran’s nuclear weapons program. Like its Western allies, India hopes these negotiations are productive.

In the meantime, however, India will continue to build on the progress it’s made toward reducing its dependence on Iranian oil imports. It will also continue to demonstrate to the U.S., Europe and its other global allies that it is a peaceful nation committed to nuclear non-proliferation.
 
Witt is president of the International Tax and Investment Center (ITIC), a non-profit research and education foundation.