New Delhi: As the countdown to the US re-imposing crippling sanctions on Iran nears its end, India hopes Washington will give Asia’s third largest economy, which is heavily dependent on imported fuel, a reprieve from sanctions on buying oil from Tehran.

“Cautiously optimistic" was how one Indian official put it last week when asked about the prospects of the US showing leniency toward India when debilitating strictures to choke Iran’s energy sector come into force on 4 November. Foreign entities, including financial institutions doing any kind of business with Iran, will come in for punishing penalties from then on.

Though India says it will only observe UN sanctions and not those imposed by countries, in this case the US, its options are severely limited. New Delhi is loathe to seeing its strategic independence constrained, but the problem before it is how to pay for the oil that it buys from Tehran given the embargo that will come into force on dollar payments from India.

A major handicap is that India-Iran trade is restricted.

In 2016-17, for example, while India imported crude oil from Iran, its exports to Tehran consisted of rice, tea, iron and steel, organic chemicals, metals, electrical machinery, drugs and pharmaceuticals worth $2.4 billion, according to the Indian foreign ministry. India’s imports from Iran totalled $10.5 billion comprising mainly crude oil.

So far, New Delhi’s strategy seems to be to reduce imports as it engages the US in talks. According to reports, state-run refiners, Indian Oil Corp. Ltd and Mangalore Refinery and Petrochemicals Ltd have agreed to purchase 1.25 million tonnes of crude oil from Iran and were preparing to replace dollar payments with rupee. However, a Reuters report last week said India’s Reliance Industries Ltd, owner of the world’s biggest refining complex, halted imports of Iranian crude ahead of the US sanctions.

With Indian private companies halting imports, New Delhi hopes to convince the US that it needs some breathing space as it looks for alternative sources of fuel to ensure its economic growth is not hit. This was the message conveyed during the India-US ‘2+2’ talks in September when US secretaries of state and defence Mike Pompeo and James Mattis met their Indian counterparts in New Delhi.

A similar message was conveyed when Brian Hook, US special envoy on Iran and US assistant secretary of state for energy resources Francis R. Fannon met Indian officials in New Delhi earlier in October.

The US had conveyed to India that it “would not leave New Delhi in a difficult situation," said a person familiar with the development.

India is also looking for respite from possible sanctions it could face as it develops Iran’s Chabahar Port seen as critical in trading with Afghanistan and Central Asia, bypassing Pakistan. Given the greater convergence of Indian and US objectives on Afghanistan, the thinking in New Delhi seems to be that a waiver of sanctions on Chabahar could be a greater possibility than on Iranian oil imports.

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