8 NOVEMBER 2018
Shape of sanctions
The U.S. waiver on Chabahar and on oil purchases from Iran brings relief, temporarily
The U.S. administration’s decision to grant India and seven other countries waivers on the sanctions it re-imposed on Iran provides some temporary relief to India. While the details of the waivers are yet to be released, the Trump administration has agreed to waive sanctions on the purchase of oil from Iran for about six months, which would help the Modi government tide over until the general elections, without any major oil price shocks. The waivers announced cover Indian investment in Iran’s Chabahar port and the plan to build a railway line from Chabahar to Afghanistan to facilitate trade. The waivers are welcome also as they indicate that despite all the harsh rhetoric on “choking Iran”, the U.S. may have had a rethink on its sanctions, and the costs incurred in pushing around allies and partners such as India, Japan and South Korea to “zero out” oil purchases. This conclusion stems from the fact that both India and China, Iran’s two biggest oil importers, have been extended waivers. This flexibility could be a sign that the U.S. is leaving space for leeway in resuming talks with Iran in the long term.
However, the fact that the waivers are temporary, and contingent on further reductions in oil trade with Iran, means that for now India will need to continue to find alternatives to its offtake from Iran. The alternative rupee-rial mechanism, which was operationalised in 2012 during the last round of sanctions, depends on increasing Iranian demand for Indian goods to balance India’s annual purchases of about $10 billion, which hasn’t fructified yet. The European Union, Russia and China have also been working on a “special payment mechanism” to circumvent sanctions. But they have yet to launch it, limiting India’s options. Moreover, despite the waivers from the U.S., India will still face the impact of the U.S. sanctions, both on oil and on its investment in Chabahar, as very few international companies may be willing to undertake contracts. Above all, by seeking the waivers, instead of sticking to its earlier line that it accepted only UN and not “unilateral” sanctions, India has lost its moral leverage. Unlike China, it chose to reduce its oil intake from Iran, and entered into negotiations for alternative fuel supplies from Iran’s rivals in the Gulf. This could, in turn, impact Delhi-Tehran ties in the long run. Meanwhile, India will have to keep engaging the U.S. in order to secure further waivers, both in this case and for CAATSA-related U.S. sanctions on Iran, Russia and North Korea. As a result, by securing the waiver the government has not exactly dodged the figurative bullet, but merely outpaced it. It will need to keep outrunning that bullet for the foreseeable future.
Back in DC
By taking the U.S. House of Representatives, Democrats can try to frame national agenda
The Democratic Party made a comeback in Tuesday’s midterm elections after spending two years in the political darkness, when it seized control of the House of Representatives. Yet, predictions of a “blue wave”, as a backlash to the racially charged, polarising campaign led by President Donald Trump, failed to materialise. The Democrats secured control of the 435-member lower chamber of Congress, flipping at least 26 seats from their Republican incumbents. This outcome, which will likely give the Trump administration pause for thought on the policy agenda for the remainder of its tenure, ends one-party rule in Washington. Yet, Mr. Trump hailed the results as a “tremendous success”, alluding to the fact that Republicans gained at least two seats in the Senate, giving them a clear majority in the 100-seat upper chamber. Results among the 36 gubernatorial races favoured Democrats: although Mr. Trump’s support paid off in some swing States crucial to his 2020 re-election campaign, including Florida, Iowa and Ohio, his party failed to hold on to power in Wisconsin and Michigan. Democrats flipped seven States out of Republican control. While the 2018 midterm election results tracked the typical historical pattern of the party controlling the White House facing setbacks on Capitol Hill, the voter split appeared to reflect the legacy of Mr. Trump’s 2016 campaign. Republicans polled well in small towns and rural areas, while Democrats fared well in urban and suburban districts across the country. The Grand Old Party scored well in Senate races in Texas, Indiana, North Dakota and Missouri
Does this mean that the bitter polarisation, racial hatred and culture wars that buoyed Mr. Trump’s prospects in 2016 have become entrenched in American society? Perhaps, but what the Democratic sweep of the House implies is that the constitutionally mandated system of checks and balances will be actively in force from January 2019. This could come in the form of House subpoenas to the White House, impediments to the progress of the additional tax cut proposals of the White House, or even putting the brakes on hardline stances impacting trade policies. Democrats under the likely leadership of Representative Nancy Pelosi may be tempted to lead the charge on inquiries into some of the Trump Organization’s murkier business dealings, or the Robert Mueller-led investigation into Russian interference in the 2016 election. But for now the Democrats are unlikely to go as far as attempting to impeach Mr. Trump. And rightly so, for a sober assessment of the midterm election mandate would focus on jobs, healthcare, and immigration, issues that matter most to the common American. If bipartisanship, and not belligerence, emerges between the two sides, that might then afford some space to discuss concerns about the functioning of the U.S. democratic machine, including campaign finance laws, redistricting and voter suppression.