A technical change in how India pays for Iranian oil, and a diplomatic shift

A couple of quick points-

@joski65: Yes, you are right. The Indian response came soon after (for reasons best known to the Iranians) Iran resumed making the kind of noises it used to make years ago (when the Ayatollah was still around). Displeasing India in this manner was silly of the Iranians, especially when they badly need non-enemies (forget friends)!

On the sanctions: It is interesting to see the US and other Western governments desist other countries from enaging in commerce with Iran, when American comanies are easily skirting the sanctions. That is being done by leveraging a loop-hole due to a rule that exempts agricultural and medical humanitarian aid from sanctions.

So, many things including Pepsi have found their way into Iran, as per a NYT report. Of course, these were somehow also "deemed to serve U.S. foreign policy goals"!

Double-standards and hypocrisy abound :-)

Tit for tat. Actually it is a retaliation to Iran's sudden support of Kashmiri Jihad.
A swift way of telling the Iranians that they can ill afford to upset India. If in the process the West is pleased, well in that case it's striking two birds...

The geopolitics of trade - should it be so viewed - are such that shifts or mere tactful changes may occur as seen fit by governments. It is a rolling situation calling for permanent appraisal and review.

India will still need Iranian oil and gas, and more of the stuff in the future. Despite market-source diversification.
Iran badly needs trading partners/friends or simply non-enemies to sell the commodities it's so bountiful in.
I wonder what the true reasons were for this move by the Indians. Nor have I grasped what the payments have changed into.
But it is a matter for the two sovereign States to decide how to engage with each other. Consequently on how to pursue two-way trade and the means of payment to back it up.

Iran is anyway a key country in the Middle East irrespective of its current political leadership.
India, being a secular State and a functioning democracy in the heart of the Subcontinent - a big country that has mostly been a voice for moderation on the world stage, albeit often a muted one - is particularly well-suited to exercise positive influence on the more radical regimes within close proximity.

Although largely self-centered, now India continues surging economically it could use smartly a predictably greater regional clout. As long as it remains stable and plays its cards aptly.
Taming the pulses of Iran's excesses would be a great start.
The world would say thank you.
The West is not alone wishing for Iranian all-round moderation.

The Iranians hardliners and their conservative backers made such noises precisely to get results like this. Iranian isolation only serves the interests of the conservatives in Iran (and conservatives in the US, India, Pakistan and Israel). It seems that the ultra right in all countries are going out of their way to justify each other’s existence.

BrainWarrior and joski65 have put their finger on it. Many US companies continue to trade with Iran (as do some entities in Israel).

What a simplistic and dreamy analysis given by The Economist. Does it really believe that this small glitch is going to hinder the import of oil from Iran? Also, Iran which is one of the major oil producers in the world is going to be severely affected due to the stance taken by India?
India constitutes only approximately 15% of Iran's oil exports. If India refuses China will be happy to replace India. US certainly can not dictate the terms to China as it is dictating to India.
More than Iran, India will be affected severly. India imports 80% of its oil requirments, out of which iran is largest provider after Saudi Arabia. If u look at the crude oil prices in the international market they are already hovering above $90 and are likely to go up considering the increasing demand from US and other countries, which are recovering from rcession. India's bargaining power in the international oil market will be amputed if it stops buying from Iran. Due to dereguralization increased prices will directly be transfered to the end users. Food inflation, which is already at 18.33% level, will start moving upward once the prices of petrol starts zooming. The Congress led Indian govt. is already under attack due various scmas and inflation can hardly afford to the backlash after the price hike.
Apart from inflationary pressure, India's growth story will be affected as input cost will go up. Even though India has asked its oil companies to look for new oil resources doemstically as well as overseas but the end cost will still be high as development of new source will take its own sweet time. In fact, this is plausible only on paper as there are very few resources available outside middle east asia.
India's govt does understand these consequences and hence it has already taken conciliatary measures to sort out the payment issue. Indian diplomats are already in Iran, cutting a new deal. Refer to the link below

http://economictimes.indiatimes.com/news/news-by-industry/energy/oil--ga...

This is the most prgamatic tool at hand and that is what a sovereign state like India should be resorting to.
Coming to the issue of permananet seat in UNSC, one must understand that UNSC is a toothless organization and bears nothing beyond symbolic importance. India is bound to become a superpower irrespective of whether it is member of UNSC or not. No wonder Obama,on his visit to India, had to literally request/plead Indian state and its businessman to create jobs back in US. According to a recent study published by leading international firm PriceWaterhouse Coopers(PwC), India will overtake US to become second superpower in the world by 2050. The report is available on net, anybody can check it.
And the last point regarding Iran's support in Kashmir. I have no idea about how much it is true, but if that is the rationale behind stopping imports from Iran, India must first stop import from pakistan. On the contrary India is pleading Pakistan to lift ban on Onion export by road.
Economics works and not jingoism.

India, as the Economist observes here, is seeking a permanent seat on the Security Council. But many think it can not get there relying merely on the lip service of P-5 members.

It needs to implement the overdue UN mandated resolution to hold referendum in Indian held Kashmir, to achieve UN’s Millennium Development goal of poverty reduction by half by 2015 and perhaps other UN obligations or role model building. As such it does not look promising in the near future.

In order to gain approval of the West and to “feel safe” from its self perceived and overblown threat from the north, India has swayed its foreign policy from a policy of “peaceful coexistence” and mutual respect with its neighbors to being increasingly belligerent against them and permitting itself being reduced as a component of the “containment”. Not exactly an enviable or smart position to be IMO.

It now looks like the problem of $12 b a year oil deal with Iran as reported in this article is but the first of payments or price India has to ante up, ostensibly to be in that position.

enough baby steps, Hindustan, time to leap.

I try and remind myself often there is one world oil supply and demand is world wide. Should India decrease purchases of Iranian oil, this will happen slowly and Iran will switch to other buyers. Or, perhaps better stated, other buyers will switch to Iran.

We have only to look at the increasing consumption of oil by China and India plus the emerging nations to clearly understand the competition for oil will only continue to grow and and that increased competition will be reflected in increasing oil prices.

Trust me on this.......when a country 'needs' oil that country will not care if the oil is from Iran or Belize.

For the first time in human history I am in agreement with all (four) comments preceeding mine !!

CARLOS wrote: Iran is anyway a key country in the Middle East irrespective of its current political leadership.

Yes Iran is the regional leader. Already Iraq moves to cement relations with Iran.

This is a great thing that India is doing. The political gain is that India will be in the United Nations Security Council, which is a good incentive for supporting economic restrictions against Iran. For Iran this is just another problem that they simply have to deal with. Soon India will probably rely on oil imports from elsewhere, such as Angola. Maybe India won't be cutting off entirely on imports of Iranian oil, but it will try to restrict it. There are economic and political implications for Iran as a result of India's actions. First, Iran will be losing even more money from lost exports, as if the economic sanctions didn't hurt it enough. Second, India joining the United Nations Security Council means that it opposes Iranian nuclear enrichment. India is probably not so comfortable with another potential nuclear player in its backyard. Iran faces the risk of being permanently cut off from international trade, and should act while there is time.

Hopefully a small sign that India is truly joining the democracies of the world and is less inclined to support evil socialist oppressive regimes.