The US is trying to deprive Iran of its main source of revenue, oil sales. India is one of the leading purchasers of Iranian oil.
reports that the White House could impose sanctions on India if the country fails to meet the US demand to cut oil imports from Iran.
Anonymous US officials told Bloomberg
that President Obama could be forced to bar access to the US banking system for any Indian bank processing oil payments through the Iranian Central Bank.
Washington, followed by the EU, imposed sanctions on Tehran in an attempt to force the Islamic republic to give up its nuclear program.
India is one of the most important US allies in Asia, but it has rebelled against American pressure to cut oil imports. In 2011 India was the fourth largest buyer of Iranian oil, followed by China, the EU and Japan. It purchases around 12% of all its crude from Iran (a transaction that is worth around $12 billion each year) and has still not asked its refiners to stop purchasing the crude.
India imports nearly 80 per cent of its oil needs and oil accounts for nearly a third of the country's imports. Its demand for oil remains high, making it hard for the country to diversify its suppliers.
Indian Foreign Ministry spokesman, Syed Akbaruddin, told Bloomberg
in an interview that: “We abide scrupulously by UN authorized sanctions” and a added that the restrictions imposed by individual countries “have an impact on commercial interactions,” and “from a legal perspective there is nothing that binds us to follow them.”
On Wednesday the International Energy Agency released a report saying that India and South Korea have both sharply increased oil purchases from Iran since January.
As the US and EU have issued unilateral sanctions against the Iran oil industry and financial institutions, earlier India and China had proposed that Iran switch from the US Dollar to gold in bilateral trade. The sanctions would ban any bank involved in the oil trade with Iran from dealing with American and European counterparts.
The EU embargo on Iranian oil will come into force on 1 July 2012, and this makes some US officials believe President Obama may be compelled to impose penalties on India as early as 28 June 2012.
This is not the first time that Washington has applied pressure on India over its economic alliance with Iran. It was reported that the country was forced to quit a joint pipeline project with Iran and Pakistan which was intended to transport gas from Ian.
In 2010, India withdrew from negotiations, and the deal was signed between Pakistan and Iran only.
Pakistan will also face US pressure over the 2,700 km pipeline which would transfer Iranian gas from 2014 and US Secretary of State Hillary Clinton has recently warned that the deal could incur US sanctions.
Apparently the new US law targeting Iranian petroleum transactions does not specify a percentage by which a nation must reduce its Iranian oil imports to qualify for sanctions exemption. However, given the high level of trade between Iran and India, particularly with regard to oil, New Delhi is a top priority target.