Now that the US has refused to extend the waiver on oil imports from Iran, Indian oil companies have been asked to reduce oil imports from Iran to zero by May 1. India has worked out supplies from Saudi Arabia, Kuwait, the UAE and Mexico to bridge the gap.
However, that is not the end of the problem. Brent crude has already touched $75 a barrel. It hit $84 a barrel when the US first announced pulling out of the nuclear deal with Iran. In November, prices dipped to $50 a barrel on the Trump regime's decision to grant waiver to eight countries, including India. The scenario may lead to a rise in international prices of petrol and diesel. Since April 21, oil companies have stopped correcting prices.
There is another challenge: Iranian oil comes with discounts, whereas Saudi Arabia charges a premium on Brent prices. In the last fiscal, Indian companies imported 50,000 barrels daily from Iran. Expensive crude will not only disturb the fiscal balance of Indian oil companies, but that of the exchequer as well.
The bigger challenge is at a geopolitical level. China has indicated that its companies may not adhere to the sanctions, which may create an imbalance in the regional power fulcrum.
Also, India's relationship with Iran is significant, strategic and historic. New Delhi will have to work hard to maintain these links.