US Secretary of State Hillary Clinton on Monday urged India to further cut its imports of Iranian oil, saying that the Islamic republic posed a major threat if it developed nuclear weapons.
US Secretary of State Hillary Clinton arrives at Palam Air Force Station in New Delhi
Hillary Clinton, secretary of state, indicated that India could face sanctions if it does not halt the trade by the end of next month during a visit to Calcutta and New Delhi.
She said India could buy its oil requirements from other countries and pointedly declined to offer an exemption if it does not meet next month's deadline.
The pressure will intensify further next month when it's special envoy for energy Carlos Pasqat will visit to assess whether it has sufficiently reduced its Iranian imports.
Washington's demands have put a strain on its relationship with India, forcing Dr Manmohan Singh's weak government to choose between its new 'strategic partnership' with the United States and it's 'civilisational links' with Iran.
Iran is regarded as India's gateway to Afghanistan and Central Asia and remains its second largest oil supplier after Saudi Arabia.
The enduring nature of its relationship with Tehran was highlighted yesterday as leaders of the Federation of Indian Chambers of Commerce welcomed an Iranian trade delegation while Mrs Clinton was in the capital to meet the prime minister.
Its visit is aimed at finding new payment mechanisms to evade EU and US sanctions, including increased Indian exports to Iran to pay for its oil imports. Iran recently agreed to accept Indian Rupees in payment for almost half India's imports.
India has reduced its oil imports from Iran in recent months to below nine per cent, but it's fast-growing economy is already constrained by fuel and power shortages – officials say it could not rapidly reduce its imports from Tehran without a political and economic blowback.
Washington has acknowledged India's efforts to reduce its dependence, but will not commit to allowing India the same exemption to forthcoming sanctions it has granted to Japan.
In Calcutta Mrs Clinton declined to offer India any comfort on the issue. "If there weren't an adequate supply ... we would understand, but we believe that there is adequate supply," she said.
"We believe, at this moment in time, the principle threat is a nuclear-armed Iran. We need India to be part of the international effort," she added.
But when asked if India might be given the same exemption granted to Japan, she said it was too early to consider.
One senior Indian businessman, a key figure in energy trade with Iran, said he believes the government will seek to meet US demands, but could not go as far as Washington has demanded.
"I can't see India completely walking away from doing business with Iran. They might quietly reduce, but they can't stop, both for political and practical reasons," he said.
Several vital Indian oil refineries, including those at Madras and Mangalore, were designed and built with Iranian investment specifically to refine Iranian crude, and it would not be possible for them to process oil from other sources, he said.