U.S. ends waiver for India on Iran oil
Topic : GS Paper-3 Economic Development
US President Donald Trump is ending sanctions waivers for allies importing oil from Iran.
• India, Japan, South Korea, and Turkey— all US allies—will likely be hit with this decision, as will China.
• The US initially granted waivers to allies to safeguard them from the sanctions if they eventually end their supply from Iran.
• Italy, Greece, and Taiwan cut off oil imports from Iran last year in November. But Japan, China, India, Turkey, and South Korea did not.
• Turkey has publicly stated that its energy needs are dependent on Iranian oil imports and that it cannot close off its borders to its neighbour.
When did the sanctions on Iran Come?
• Trump imposed sanctions on Iran after he made the US pull out of the Obama-led Iran nuclear deal of 2015.
• The 2015 deal, formally known as the Joint Comprehensive Plan of Action (JCPOA), lifts sanctions on Iran in exchange for the country ensuring its nuclear programme is “exclusively peaceful”. Under this deal, Iran was to get billions in relief on lifting of sanctions on its trade, technology, finance, and energy sectors. The country’s oil sector alone had suffered a loss of $160 billion under sanctions.
• Iran agreed to get rid of its centrifuges and most of its bomb-making material and promised not to acquire or develop nuclear weapons in the future. The country even agreed to regular, on-ground monitoring and inspections by international officials.
• Although Saudi Arabia and Israel protested to the deal, claiming Iran is dishonest about its nuclear intentions, the US, China, Russia, UK, France, Germany, and EU at large signed the deal with Iran.
• The signatories agreed that the deal wasn’t perfect but a step in the right direction. However, after being elected, Trump made the US back out of it, saying the deal was “terrible” and “defective at its core”.
• He also said it is ludicrous to believe Iran’s “murderous regime” only wants a peaceful nuclear energy programme. He added that the 2015 deal was a gateway to Iran acquiring a nuclear arsenal that could be used against the US.
• Hence, in 2018, Trump announced that he would cancel the previously negotiated deal and threatened Iran with “consequences the likes of which few throughout history have ever suffered before”. He also re-imposed sanctions on Iran’s oil exports.
• Later that year, he said he was “ready to make a real deal” with Iran but offered no details. In contrast, the UK, France, and Germany agreed to honour the 2015 deal and condemned Trump’s actions because they believe that the deal is the current strongest deterrent to an arms race in the Middle East.
• The US believes that oil sanctions will help increase pressure on Iran because they will choke its import revenue. US National Security Adviser John Bolton said, “The policy is not regime change, but we definitely want to put maximum pressure on this government.”
• Iran disagrees and has accused the US of violating international law by backing out of a signed agreement. President of Iran Hassan Rouhani has also said he will initiate an “economic war” with the US if required.
Impact on the Indian economy
• Trump said companies that do business with Iran will not be working with American companies. The US can blacklist Indian companies and seize their assets.
• However, India, China, and Turkey said they weren’t willing to cut off business ties with Tehran.
• The impact of sanctions depends on the exposure of a country to the US market.
• US-India trade stood at $142 billion in 2018, including $83 billion in exports from India. India is the ninth largest trading partner and 10th largest exporter to the US.
• Prior to the 2015 Iran nuclear deal, India was weaning off its oil imports from Iran. However, the deal opened up more avenues for India.
• Hence, as the country’s third largest importer of oil, India stands to benefit from an association with Iran. In 2018, despite the threat of sanctions, India imported six million barrels from Iran.
• Minister of External Affairs Sushma Swaraj said India only abides by sanctions imposed by the UN, not other countries.
• India and Iran also bypass Pakistan and connect through the Chabahar port where India has reportedly invested $500 million to counter the China Pakistan Economic Corridor.
• Experts also say Trump’s decision to impose sanctions threatens the US’ influence in the South Asian region where India is a major power and a traditional American ally.
Crude oil price rise
Topic : GS Paper-3 Economic Development
Brent crude rose to an intra-day high of $74.31 per barrel and was trading at $73.7 per barrel, up $1.7 or 2.4%, from its previous closing.
• A rise in the price of crude oil hurts the economy because crude accounts for a significant portion of India’s overall imports. If crude rises further, it will not only impact the stability of the rupee and the rise in stock markets, but may also produce an inflationary effect.
Why price of Brent crude is increasing?
• United States stop granting sanction waivers to any country importing Iranian crude or condensate beginning May 2, 2019.
• The US sanctions on Venezuela.
What is the impact on the rupee?
• If Brent continues to rise, the rupee is likely to face additional pressure.
• While expectations of weakening global growth may temper its rise, the news of the end of waivers for the Iran sanctions has spooked the market.
• Crude has traditionally been a big determinant of the way the rupee moves. In October 2018, the rupee fell to an all-time low of 74.34 against the dollar in line with rising oil prices.
• A weak rupee hurts the country on account of the higher import bill and current account deficit, and also tends to be inflationary. The Reserve Bank of India will be watching the movement of crude and domestic inflation before going for another rate cut this year.
Does the US decision on Iran hurt India’s imports?
• In the 10-month period between April 2018 and January 2019, India imported $97 billion worth of petroleum oil and oil obtained from bituminous minerals crude. Almost 11.2 per cent of petroleum oil, worth $10.9 billion, were imported from Iran.
• The US decision to end waivers for countries importing crude from Iran beginning May 2 may hurt India’s interests, as it will have to look for alternative sources of oil.
• The US sanctions on Venezuela are already restrictive for India. From April 2018 to January 2019, India imported almost 6.4% of its requirement from Venezuela.
• If both countries are now pushed out of India’s equation, almost 17.6% of its total imports will be impacted. Also, if the total supplies from these two big oil exporters is kept out of the market, it will lead to a supply crunch, and likely increase in overall crude oil prices.
What are the other sources of crude oil for India?
• While Iraq is the biggest exporter, Saudi Arabia is a close second, and both of them account for 38% of India’s total petroleum imports. UAE and Nigeria together account for 16.7%.
• However, the biggest change has been the entry of the US as a major player. While it did not figure in the list of top 10 petroleum exporters for India in 2017-18, in the 10 months of FY’19, the US stood at number 9 with an over 3% share of India’s petroleum imports.
• It is a major trading classification of sweet light crude oil that serves as a benchmark price for purchases of oil worldwide.
• This grade is described as light because of its relatively low density, and sweet because of its low sulphur content.
• Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation).
• The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum.
• Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to price two thirds of the world’s internationally traded crude oil supplies.
Global Deal for Nature
Topic : GS Paper-3 Environment
• A paper published in Science outlines a new “Global Deal for Nature,” officially launching an effort to establish science-based conservation targets covering all of planet Earth, including terrestrial, freshwater, and marine ecosystems.
• The Global Deal for Nature proposes a target of 30 percent of the planet to be fully protected under the UN Convention on Biological Diversity by 2030. But because much more of Earth’s natural ecosystems need to be preserved or restored in order to avert the worst impacts of runaway global warming, another 20 percent of the planet would be protected under the GDN as Climate Stabilization Areas (CSAs).
• Conservation scientists, environmental NGOs, and indigenous groups are urging governments to adopt the GDN as a companion commitment alongside the Paris Climate Agreement approved by nearly 200 countries in 2015.
Global Deal for Nature
• The Global Deal for Nature (GDN) is a time-bound, science-driven plan to save the diversity and abundance of life on Earth,” according to the paper.
• “Pairing the GDN and the Paris Climate Agreement would avoid catastrophic climate change, conserve species, and secure essential ecosystem services.
• New findings give urgency to this union: Less than half of the terrestrial realm is intact, yet conserving all native ecosystems coupled with energy transition measures will be required to remain below a 1.5°C rise in average global temperature.
• The Intergovernmental Panel on Climate Change (IPCC) released a special report last year highlighting the impacts of global warming that are already being felt around the globe and warning that those impacts would only get even more severe if global average temperature rise is not limited to 1.5 degree Celsius above pre-industrial levels.
• The GDN campaign is being driven by One Earth, an initiative of the Leonardo DiCaprio Foundation that aims to marshal support from international institutions, governments, and citizens of planet Earth to support ambitious conservation goals. One Earth has launched an online petition drive at globaldealfornature.org along with RESOLVE and indigenous groups to build popular support for the GDN.
NEWS in Brief:
Recounting of vote
• An election recount is a repeat tabulation of votes cast in an election in order to determine the accuracy of the initial count. Political parties and candidates sometimes demand a recount in close contests if they believe there has been an error in the counting of votes.
• In India, provisions relating to recount are contained in Rule 63 of the Conduct of Election Rules, 1961. However, a recount is not possible if the election result has been declared and a candidate certified as the winner. In such cases, the only remedy is for an aggrieved candidate to challenge the election in court.
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