 Hello, and welcome to NewsClick's International Round. It's almost a truism that the relations between countries across the world are to a large extent mediated by oil. From the U.S. intervention in Iran in the 50s to the Gulf War in the 90s and even the politics with Iran today, oil has played a considerable role. To talk more about this, we have with us Prabir Purukayastha, founding editor of NewsClick. Hello, Prabir. Prabir, as you know, the first round of U.S. sanctions has kicked in against Iran. The second round is going to kick in in November. And it is this round which actually focuses on oil. So how would you analyze these sanctions and the global geopolitics around it considering oil supply rules? I think it's important to understand that the role of oil, particularly in the region, because Saudi Arabia is another big producer, United Arab Emirates is a big producer, Qatar is a big producer, and of course Iraq and Iran were the two other producers. Iraq at the moment is a bit out of the equation under partial U.S. and Iran hegemony. So it makes Iraq a little more complicated, the rest. For a part of the time, Qatar was firmly in the under U.S. domination. It still has a major U.S. base in the region. But with the kind of sanctions that Saudis have imposed on Qatar and the United Arab Emirates, Qatar is a bit of an outlier at the moment. In fact, it shares one of the gas fields with Iran. So there is a shared, shall we say, stake also that it has with Iran. So it's not really completely on the Saudi United Arab Emirates and the U.S. side. If we take these three countries, Iran, the United Arab Emirates and of course Saudis, the bigger producer, then you will see the states of Hormuz becomes a very important part of the equation. You have the biggest choke point of transit in the world is the states of Hormuz, which has roughly 19 million barrels per day that passes through it. If you see also the total amount of oil that is transported, you will see that two-thirds of it is through seas. And I think it's roughly about 60 to 63% of the total that passes through seas. And a very significant part of it is passing through states of Hormuz. If that is taken out of the equation, that means if there is a war with Iran, very chance, states of Hormuz will get closed. And if it does, the world economy will take a huge hit, because this is the main supply route to both India, China, Japan and Korea. So we have a huge stake in this part of the world. So US basically at the moment wants to take Iran out of the equation without getting into war, that means the states of Hormuz does not close. But Iran's contribution to the global energy basket actually dries up. And this is the attempt that it is doing by now imposing sanctions, as you said, on oil, which means that it will be very difficult for countries like India and China to get to dollar oil. So essentially if they want to buy Iran oil, they have to both get out of the dollar economy, particularly with oil transactions. And we'll also have to look at bottoms, which do, that means tankers, which are not under, shall we say, the control of the West, in terms of the basic insurance premium that has to be given. You see, earlier also India had a problem, not because of only transactions that it had to make in rupees, or for a time it made in Turkish lira also, but also because their ability to buy oil and transfer it to India through tankers became a problem, because tankers would not get insurance, because insurance companies would come under US sanctions. So this is the complex issue that we have to see in terms of Iranian sanctions. And the US attempt is really to drive Iran out of the market by imposing sanctions. The question is, what will India do? China has indicated it will use Iranian tankers, its own tankers, and it is going to work out alternate payments and not use the dollar. So they seem to be pretty clear which way they want to go. Turkey has also announced that it is not going to suspend the oil ship and so on, we'll have to see what it really does. India at the moment seems to be dithering. It's not very clear what it will do. Does it give in to the US and accept that it will not buy oil? And the current indications are it will not reduce buying oil from Iran, but will not increase it. Will it seek special dispensation from the United States as a partner and various other things it does, because Modi has indicated at least on the issue of China that it is willing to play ball, at least on the Asian containment of China policy. That's something that we have to see whether they will actually agree or not. If we don't, then of course we are okay, we'll have some problems, how to import, how to pay and so on. But if we do agree to what the Americans are asking us to do, there's a huge problem because the price of oil in the international market which is non-Iranian oil will immediately probably jump for us from 15 to 20% because this is close to us. The prices that Iranians are giving are cheaper. It's oil which our refineries have been accepting, they won't have to tinker with that. So it's going to have economic consequences. And with the current balance of payments, low growth rates, all that we are seeing today, I think it will be very economically very dangerous for India to do so. Second choke point and that's another interesting issue is the states of Malacca. And if you see the states of Malacca, this is also where India's, shall we say, naval exercises in the United States and with Australia and Japan have been held. So this is the second choke point and again this is primarily oil shipments to China. And obviously this has strategic importance for China. And this is one of the reasons that the economic corridor that China is trying to work out in Pakistan and develop into the Ghadar port is really for this because then Iranian oil or Iranian natural gas can come to Ghadar and then be pumped to China through Pakistan and of course parts of Afghanistan into China. So this is the other part of the equation. We won't understand the geostrategic importance for the economic corridor that China is trying to build through Pakistan unless we understand that all these naval exercises of the states of Malacca is also aimed at the second choke point in the world. These are the biggest choke points, states of Hormuz and Malacca far beyond the Panama Canal or the Suez Canal. So these choke points are very, very critical for both India and China. And therefore Chinese are trying to prevent this from happening. The states of Malacca getting closed and they're getting impacted and that's why the Ghadar-Gwadar port for them has become important. This would be an alternative way to get Iranian oil and gas unless they can build the pipelines to Central Asia which is some distance away. And talking about pipelines actually if you look at US policy statements and US research documents on this issue, a lot of their emphasis actually has been on how do you find alternatives to the states of Hormuz. I mean they have considered certain Saudi pipelines as an option of course but still their capacity is very limited. So do you see that as a possibility that might actually say help make up in case, at least as far as the Saudi Arabians or the Americans are concerned, make up the shortage in oil? No, I don't think there is any way they can do it because Saudi Arabia whatever they have tried to build and the most they have, suppose it is 3.9 million barrels per day that they can transfer, which could be considered as spare capacity. But at the moment even that's very, very doubtful. The figure itself is very, very doubtful. If you look at 19 million barrels and 3.9 million barrels very clear that there's a huge shortfall that hit the global market if this happens. And states of Hormuz is crucial for both Saudi Arabia and for Iran. So it's not just Iran that we are talking about, it's also for Saudi Arabia, it's also true for United Arab Emirates, it's also important for other countries in the littoral states as it were of the states of Hormuz. So I think this is going to be one of the major reasons why US military really doesn't want to attack Iran because they understand that closing states of Hormuz is relatively easy if any war takes place. And therefore I think they are very reluctant, understanding the geo-strategic importance as you said, oil being one of the important elements of geo-strategic in the world. And the US military has been very reluctant to get involved in Iran. Apart from the fact they are already in Afghanistan for the more than 10 years, have not been able to successfully handle it. Iraq has been a disaster for them. Libya is still a big disaster. So given all of this, I think a military misadventure is the last thing they want. And therefore the Trump policy, can he do it painlessly? What risk the Trump policy carries of course to the dollar itself? Because oil is the new gold in terms of the, shall we say the foreign exchange issue. And begging dollar to oil means that all transfers of money between nations for buying oil or natural gas takes place to the dollar. And if that de-linking takes place, then US hegemony over the financial system would actually weaken. So I think the fact that they cannot find alternatives and that therefore people will be forced to buy oil from Iran and natural gas from Iran is also they're risking their underpinning of their dollar which is really the oil economy which most of the oil sales in the world are denominated in dollars. And looking at out of the angle here, I mean we've also, if you look at the supply maps we see that say other key producers include for instance Russia or for that matter Venezuela and there are also certain choke points there. So how does the US policy regarding its own possible reserves in terms of say, shall actually figure factor into this whole equation? Is there also politics going on there? Well I think one of the arguments that Trump is making while he's trying to say I would like to normalize relations with Russia but the question of Western Europe has been very clear that Western Europe should pay for NATO, it's one part of it. The second part of it, why are they accepting the pipeline from Russia and greater hydrocarbon dependence on Russia? Instead they should buy our shale oil and buy our natural gas which we can liquefy and send to them. So there's a clear underpinning of hydrocarbons in their Russia and West Europe policy itself and it seems to be dichotomy that why would he threaten friends like Western Europe and also make all these noises about Russia being, you know, why are you buying Royal and gas to Russia? At the same time say we need to make friends with Russia. So there seems to be a dichotomy in this but it is not once you see where Trump is coming from essentially increase geopolitically the hydrocarbon shall be say quantum that United States can bring to the market. United States has been a big player. In fact it bought a lot of oil and gas but compared to what it produces that was not such a big amount and therefore with shale oil, shale gas coming into the market they have been able to overcome even that little bit of dependence that they had on West Asia, it must be understood that their dependence on West Asia was not the issue. Controlling West Asia hydrocarbon means you control the world's geostrategic very important resource and you also control in that sense the exchange rate of the dollar. So this is the reason that they wanted to control that the West Asia region also not purely for import into United States and that also explains that if they take Venezuela and Russia out to the market the debt caterer of course will be Saudi Arabia but also the United States which could bring then its own hydrocarbon reserves particularly with shale oil and shale gas into the market. How long and how viable the shale gas, shale oil option is we have to see because that's at the moment there are a lot of hype and claims about it but I'm not sure how it really is going to transform the hydrocarbon scenario as many people are saying but it is clear that their enmity towards Venezuela if you look at Venezuela, you look at Iran, you look at Qatar, you look at the choke points all of it gives you a different picture of the way the world is going. Then if you just look at that Russia is a friend of Trump trying to destabilize American elections that America does not like lack of democracy as Venezuela has never stopped them from supporting dictators anywhere in the world that suddenly they've discovered that Maduro who's held elections is not somebody who they can actually tolerate. This all shows that there is a completely different set of equations that plays in this game and it's a matter more of geo-strategies of hydrocarbons that also underpins US foreign policy. Thank you, Prabir. That's all we have time for today. Keep watching.