Indian Oil Imports and the Saudi Rivalry

New Delhi has resumed payments to the country’s second largest crude oil supplier, Iran, following an elongated stalemate during which the payments were suspended because of the UN embargo imposed on Tehran. Reports claim that over $100 million has already been paid off and the issue has been “amicably sorted out”.

A critical question, however, has risen over the issue. Is the new oil deal between India and Saudi Arabia an attempt of the latter to exploit the Iran-India dispute?

Riyadh has reportedly struck a deal with New Delhi for supplying three million barrels of extra crude. The move comes in the wake of Iran announcing the suspension of crude to India because of the payment row that has been lingering for many months now. The dispute, in fact, is another instance of the Iranian-Saudi rivalry being played out in South Asia.

At the core of the India-Iran problem is the method of payment. It’s not that India is unwilling to pay. India and Iran had an arrangement under a clearing house system for several years that’s no longer applicable as the sanctions against Iran have become stringent over the years. While Tehran is trying to revert back to the older system, New Delhi clearly favours a more transparent system. Hence, the discontent and New Delhi’s inability to facilitate the payments.

Iran, now, is mounting pressure on India about suspending crude. However, the entry of the Saudis is a message to Tehran that it has other options. Saudis, on the other hand, are exploiting the standoff to the fullest. From their view, they can step in for reducing the Indian dependency over Iran that would be an undeniable blow to the latter’s foreign earnings.

The Riyadh-Tehran rivalry mostly centres in the Persian Gulf where Iran has an upper hand. Saudi Arabia is looking for ways to counter the Iranian moves in regions beyond the Persian Gulf. One such region is South Asia. The Iranians and Saudis have already played it out in Pakistan as well as the wider Afghanistan. In the New Delhi-Tehran crude payment row, Riyadh is trying to extract the advantages of another fault line of Iran. Should Riyadh be able to steer New Delhi towards its orbit, it would be a major gain for the former against their arch rivals. It’s not as if New Delhi is overwhelmingly willing to dump Tehran in favour of Riyadh. India, characteristically, favours a diversified foreign policy approach especially in the sphere of geopolitics, security and economics.

Though it would be too premature to predict whether India would completely dump Iran to favour Saudi Arabia, it could be said nevertheless that as long as there’s a row between India and Iran, the Saudis would take full advantage of it. Only when a new mechanism to disburse the payment is achieved that the dispute would no longer be advantageous to the Saudis. But till such time, the payment row is up for grabs for Riyadh, already earning international flak for allegedly sheltering the now hounded out Libyan dictator Muammar Gaddafi.

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