The US has offered to make available crude at concessional terms as India faces runaway fuel price rise when trade with Iran stops as the waiver on oil imports granted to India ends on May 2. However, there is cause for concern that any concession deal could come with strings attached affecting India's strategic interests involving Iran and Russia.
International crude prices have spiked after news emerged of US decision to end the waiver from Iran trade sanctions given to oil imports to India, China, South Korea and Turkey emerged. China and Turkey have taken a defiant stand but India has agreed to stop buying Iranian oil. International crude price has hit a recent high of $74 per barrel and there is a threat that it could go even higher. India's domestic fuel prices are linked to the international oil price and an increase in international crude price could push up the fuel price and hurt Prime Minister Narendra Modi's re-election bid in the ongoing general election.
The US has strong strategic ties with the Persian Gulf states of Saudi Arabia and the United Arab Emirates (UAE) that view Iran as a regional rival. India, however, has long-standing strategic relations with Iran and cannot afford to alienate the nation, which provides the only corridor for stable access to Afghanistan and Central Asian nations like Uzbekistan, Kazakhstan and Turkmenistan. India developed Iran's Chabahar port as a counterweight to Chinese-controlled Gwadar port in Pakistan's Balochistan province. The port is a key hub of the China Pakistan Economic Corridor (CPEC), which is part of China's ambitious Belt and Road Initiative with economic and geostrategic ramifications.
Beyond trade, New Delhi considers ties with Teheran as important for containing geopolitical strategies of Islamabad and Beijing. Gwadar port is considered to be part of China's 'String of Pearls', a network of ports intended for Chinese power projection in the Indian Ocean Region.
It is not clear whether the US would meet India's expectation of buying oil under the same lenient terms as Iran provided including a 60-day credit period. Washington has apparently asked Riyadh and Abu Dhabi to help India meet the shortfall with the cancellation of the deal with Teheran.
The US is also unhappy about India's strong defence ties with Russia. India is one of the largest arms importers from Russia and there are ongoing discussions for buying more arms from Russia. US arms manufacturers are direct competitors to Russian arms makers and they have always envied India's cosy relationship with Russians. Though India is in talks with the US manufacturers for buying more military equipment, the slow progress has been frustrating for them. Any deal with the US for oil at concessional terms could provide US arms makers leverage in trade talks.