Iran's Chabahar Port Scores an India- and Afghanistan-Inspired Sanctions Exemption

Galtero Lara
Noviembre 9, 2018

In Moscow's first official reaction since the restoration of Washington's bans on Tehran, Russian Foreign Minister Sergei Lavrov said on Tuesday that the USA sanctions are "not legitimate".

Hinds sees a short-term rally in reaction to a supply deficit in the fourth quarter, but a more significant, sustained boost in oil prices, he says, will require longer-term supply disruption to markets.

Lavrov emphasized that Russian Federation and its European partners were looking for ways to maintain economic ties with Iran.

With output overall rising, supply is ample despite the Iran sanctions now in place, prompting rumblings within the Middle East dominated Organisation of the Petroleum Exporting Countries (OPEC) that renewed supply cuts may be needed next year to prevent a glut.

Iran late a year ago inaugurated the port on the Indian Ocean, which is being built largely by India and is expected to provide a key supply route for Afghanistan while allowing India to bypass rival Pakistan to trade with Central Asia and Africa. All of them maintain that they will continue to trade with Iran.

"Oil prices continue to decline and are now officially in a bear market, having declined 20 per cent from their (October) peak", said William O'Loughlin, investment analyst at Australia's Rivkin Securities.

"Bernstein Energy expects "Iranian exports will average 1.4-1.5 million barrels per day (bpd)" during the exemption period", down from a peak of nearly 3 million bpd in mid-2018.

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The sanctions exception granted to the Chabahar project aims to further U.S. ties with Afghanistan and India "as we execute a policy of maximum pressure to change the Iranian regime's destabilizing policies in the region and beyond", the State Department spokesman said.

Some market watchers believe the Organization of the Petroleum Exporting Countries and allies including Russian Federation may take steps to reduce supply.

"Certainly, the waivers on US sanctions for Iranian crude have really accelerated the decline from last month and sensitivity to those issues have been high in recent times", said Daniel Hynes, a Sydney-based senior strategist at Australia & New Zealand Banking Group Ltd. "The US has given waiver to some countries including India". We are yet to know what are the serious concessions conceded by the Indian government.

The other waiver given for India's investment in the Chabahar port in Iran is also motivated by America's interest in getting greater Indian involvement in Afghanistan as the port will give India access to Afghanistan bypassing Pakistan.

There was no need for India to cravenly accept the United States sanctions on Iran.

Unlike India, China has denounced the new United States sanctions.

The sanctions, however, will inevitably erode Iran's state finances and raise already high inflation and jobless rates, making life harder for ordinary Iranians. Thus, if India had wanted, it could have cooperated with all these major countries in order to ensure that its oil trade with Iran and other business investments could be carried on.

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