Bravely, and at risk to its economic development, India's central bank declared over a week ago that the Asia Clearing Union could no longer be used to settle transactions between India and Iran attaining to the India's purchases of Iranian oil and gas supplies, thereby delivering a highly meaningful and symbolic blow to the Iranian regime (please see "The Oil Nabobs Slouching Towards Iran. Time for a Peoples Boycott")
According to a New York Times article, "Move to Curb Transactions for Iranian Oil Leaves Indian Companies Scrambling":
The clearinghouse allowed Indian companies to pay Iranian companies via the two countries' central banks. But it also meant that transactions were less transparent, making payments to companies controlled by groups banned under the sanctions regime more obscure.
According to the article, India's decision to rethink its crude oil purchasing rules is "a sign of the deepening ties between India and the United States."
The article goes on to inform. "Weaning India off Iranian oil is particularly difficult now, as supplies are tight, prices high..." Really??
Firstly, supplies are not tight. There is a glut of oil in the world. Not only is there ample current supply, but Saudi Arabia alone, perhaps even more directly at risk from Iran's nuclear ambitions, has been letting sit idle a production capability of some 4.5 million barrels a day above their current daily production of approximately 8 million barrels a day.
India imports some 350,000 barrels a day from Iran, a quantity that the Saudis could easily supply -- and in a way that it would have zero impact on oil prices, should it be their want to do so. However, should the Saudis' attempt to play this propitious turn of events in a way to spike prices, more in keeping with their standard cartel driven pricing policies, there is another solution available.
The United States has in its Strategic Petroleum Reserve near 750 million barrels of oil -- oil that is meant to be used in crisis and/or consequent national emergency. What contingency at present or on the horizon bears greater gravitas than the prospect of a nuclear-armed mullah led Iran. In consideration of the remarkable courage that the Indian authorities are exhibiting in confronting this danger and in solidarity with India on this potentially existential issue, our government should declare it is ready to supply any shortfall of the 350,000 barrels a day that India cannot cover from other sources at prices reflecting current markets. Were we to supply India from our SPR a total of 350,000 barrels a day (an eventuality that is highly unlikely), it would only be for a relatively short period of time, given the plethora of other oil sources currently available in the global marketplace. However, should the worst come to pass, as far fetched as that would be, we could make available to India that amount for a total of 2,142 days or near on to six years from our current SPR alone.
Our willingness to step into the breach would be a gesture of solidarity on an issue of vital importance to both nations. In addition, our Secretary of State Clinton might well make a detour to Riyadh and remind the Saudi's that India's courageous policy is in their core interest as well. She might even slip in that the United States' naval flotilla in the Persian Gulf, costing American taxpayers some $100 million a day, presumably protecting the Straits of Hormuz permitting ever higher priced Saudi Oil to flow to world markets, but more manifestly protecting the Saudi coastline, and Saudi Arabia itself from Iranian aggression, might, just might find another deployment elsewhere on the globe.
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