COMMENTS: Officially, India does not recognize the US sanctions on Iran and had announced that it will continue buying Iranian oil.
But, unofficially, the long arm of the US extends to the financial arteries of all the world. And since, one way or the other, almost everybody is dependent on the US Dollar and US banks, it is impossible to transact without their consent.
One Indian refinery after the other, fearing US penalties, have now begun ending their Iranian oil purchases. A few days ago, a major Indian oil refinery cancelled a one-million-barrel shipment of Iranian oil because its insurance company refused to insure it fearing the same penalties.
This is certainly frustrating for India; whose economy is growing rapidly and needs plenty of oil. It has been buying approx. 600,000 barrels per day from Iran (possibly at attractive rates and terms) and to stop entirely now could be disastrous. How will it replace it from? And at what prices? Will it reconsider taking up Venezuela’s offer to buy its oil against the El Petro, Venezuela’s new oil backed crypto currency? Or will it also trip on the US sanctions on Venezuela?
NEGATIVE FOR: Iran and India, and possibly the surrounding region.
POSITIVE FOR: Possibly for Saudi and the other oil exporters who may fill in the supply shortage. But, this could trigger a reaction from Iran, which could easily escalate into a disastrous war.
IMPACT POTENTIAL: High
TIME SCOPE: Short Term