India: Why Bowing to US Pressure on Iran Oil Imports Will Hurt India

Last Updated: 18 September 2018
Article by Piyush Joshi
  • For every $1 increase in crude oil prices, the impact on India is likely to be around $ 1 billion.
  • India would have to shift from reasonably priced Iranian crude to more expensive Saudi crude.
  • Legally India can and should put the US actions to test.

"Don't you know the Golden Rule Boy? Whoever has the gold makes the rules"

This one liner of the evil Wazir from the 1992 Disney Hit "Aladdin", aptly summarizes the attitude of President Trump's regime in the US, albeit on the somewhat self-assumed, but factually debatable notion that it has the gold. Presently, the starkest display of this attitude in its full form, lies in its dealings with Iran and countries having economic relations with Iran such as India.

The Joint Comprehensive Plan of Action (JCPOA) was executed on July 14 2015 between Iran, the five permanent members of the UN Security Council (China, France, Russia, United Kingdom, United States), Germany and the European Union. The Security Council then endorsed the JCPOA by unanimously adopting Resolution 2231 of 2015. This resolution provided for the termination of the provisions of the previous Security Council resolutions that had imposed specific restrictions applicable on all members. Under Article 25 of the Charter of the United Nations, member states are obligated to accept and carry out the Security Council's decision, and hence decisions of the Security Council become international law. Thus, Resolution 2235 of 2015 converted what was initially a political agreement between specific nations into legal obligations that are binding under the UN Charter. In fact the Resolution 2231 of 2015 specifically "calls upon all Member States...to take such actions as may be appropriate to support the implementation of the JCPOA, including by ... refraining from actions that undermine implementation of commitments under the JCPOA ".

Even outside the UN Charter framework, the JCPOA is clearly a "treaty" and governed by the Vienna Convention and the paramount principle of international law of pacta sunt servanda – the notion that treaties constitute binding legal obligations that must be performed in good faith.

Since December 2016 and steadily through 2017, the US government acting particularly through its President had been seeking to undermine the deal, which in itself was a violation of the Security Council Resolution. Also, under the UN Security Council Resolution, withdrawal from JCPOA and re-imposition of sanctions is possible on basis of "significant non-compliance". Although the term "significant non-compliance" is not defined it would still need some basis for a member to claim that "significant non-compliance" has occurred.

US' Unilateral Withdrawal from the JCPOA

On May 8, the US announced a "unilateral withdrawal" from the JCPOA and its President directed the various agencies of the US to re-impose sanctions. The statement released by the White House provides no concrete reasons, other than claiming that JCPOA "failed to protect America's national security interests" and that Iran has been using the money obtained from the economic activity allowed pursuant to the JCPOA, to fund "military build-up and its terrorist proxies such as Hezbollah and Hamas". None of the other members of the UN Security Council have endorsed this view. The said treaty is therefore still very much part of international law and also binding on all members under the framework of the UN Charter.

By undertaking the unilateral withdrawal the United States has closely aligned itself with Israel and Saudi Arabia. The US has also repealed its domestic laws that had been enacted to implement the JCPOA and has instead enacted a domestic law triggering the "wind down" of US entities that had obtained permissions under the JCPOA regime to undertake business with Iran. Further, following the "National Security Presidential Memorandum" issued on May 8, 2018, the US will impose secondary sanctions that will also impact non-US companies that carry out certain activities with Iran. This will get triggered at end of the "wind down" periods of 90 days and 180 days. Non-US companies dealing with Iran in relation to petroleum related transactions will get impacted at end of 180 day period, which will end on November 4, 2018.

Impact on India

It is here that India gets materially and adversely impacted. The JCPOA had resulted in lifting of sanctions and opening up of the access to oil from Iran and India presently imports 10.4 percent of its total quantity of imported crude oil from Iran.

The so called "wind down period" being applied by the US under its domestic laws will end on November 4 and Indian companies including BPCL, HPCL, IOCL, Reliance, GAIL that have dealings in various petroleum products with Iran, including importing crude oil and refining will get hit and would need to comply or face actions from the US government. The economic impact of shifting of 10.4% of crude import from reasonably priced oil from Iran to other international sources will be substantial. As a ball park, for every $1 increase in crude oil prices, the impact on India is likely to be around $ 1 billion.

India would have to shift from reasonably priced Iranian crude to more expensive Saudi crude apart from having to address various national security concerns.

The US of course issues "waivers" and is essentially seeking deals relating to grant of such waivers. The crucial issue then is whether India is in a position to bargain hard in relation to obtaining these "waivers".

Options for India

However, legally India can and should put the US actions to test. Raising legal disputes is within the international framework and India should take the lead to test the unilateral "golden rules" being written by US and make it answerable. This needs to be done both at the level of the International Court of Justice, as well as the WTO.

India should also file, in the appropriate US Courts, a tortious claim against the US for issues arising in relation to the unilateral violation of the applicable framework of international trade and consequential economic damage to India of equivalent quantum.

These circumstances also bring to light the present pressing need for India to enacting an Indian international economic law that would enable India to take action under Indian courts against foreign Governments that cause economic harm or damage in violation of international law. In this regard, we can emulate the US' Countering America's Adversaries Through Sanctions Act (CAATSA), to reserve rights in respect of entitles that deal with terrorist organisations active in India.

Originally published by CNBC TV18, July 2018

Piyush Joshi, partner, Clarus Law Associates, specialises in Energy, Infrastructure Projects and Project Financing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions