Knowledge Enhancer – 1 (Current Affairs analysis in short)
Knowledge enhancer –1
Understanding Crude Oil trade and Indo-U.S relations under Trump….
Crude Oil is classified into two categories –Sweet Crude and Sour Crude. The sulfur content is the factor that differentiates the two varieties.
Sweet crude oil has much lower sulfur content (less than 0.5%). It is easier to handle in a refinery, and so, is much in demand. Low sulfur means less corrosion of refinery components, and so low maintenance cost of plant and machinery. If tasted, this type of crude actually tastes sweet!
Sour crude oil has sulfur more than 0.5%. Presence of Hydrogen Sulfide in the crude increases the sulfur %, and imparts a foul, rotten egg type smell to the crude. Such crude oil is toxic to humans, besides being corrosive to a refinery’s plant and machinery. Because of such adverse factors, crude oil is generally not the buyer’s first choice, and is sold at a lesser price compared to sweet crude.
It is worth mentioning here that a refinery designed to handle sweet crude oil can’t process sour crude oil. Some modern refineries, however, can handle both types of crude.
How crude oil enters the Indo-U.S dialogue ..
Ever since President Trump came to power, he has been single-mindedly pursuing a policy that keeps America’s interests first. Presently, India imports less from the U.S, than it exports to it. This results in an adverse trade balance between the two countries, in India’s favour. President Trump wants to reverse this situation as much as possible through different pressure tactics.
When Foreign Secretary Pompeo and Defense Secretary Mattis came to Delhi for the 2+2 meeting with their Indian counterparts, they exerted considerable pressure on India to
a. Cut oil imports from Iran to zero
b. Source more crude oil from America.
The Indian side resisted the demand for curbing imports from Iran saying that Iran is an important oil supplier and it’s nearer to India and offers crude in lesser rates. So, drastic reduction of imports from Iran is not possible.
On the question of buying American crude oil, there are two technical problems.
a. Because of the vast distance between the U.S and India, freight costs are quite high. This can be somewhat offset by transporting the crude in VLCCs (Very Large Crude Container). Such ships have capacity to load a whopping 2,50,000 tons of crude. But, such ships need specialized ports with suitable loading equipment to fill the VLCCs with crude oil. America has just one such port ready now. Its name is Louisiana Offshore Oil Port located near the southeastern part of the country, touching the Gulf of Mexico. With just one loading outlet, increasing imports of crude from the U.S. suffers a bottleneck. Although, the crude America is offering is sweet in nature, it is sourced from the shale gas deposits in other parts of the country. So, there are logistical problems too.
However, after Trump’s public demand on India to increase its imports from America, India has stepped up purchase of American crude oil. Consequently, the trade deficit has gone down by 1.5 billion dollars in April-July 2018 to $5.67 billion from $7.09 billion in April-July 2017. India has assured that it will scale up its purchase of American crude in the coming months.
However, the Indian side stressed the fact that as a bulk buyer, India will look for crude at the cheapest rate and the proximity of the supplier will weigh in heavily while deciding the source of such a strategic commodity. Even the Arab countries like Saudi Arabia and Kuwait can’t fully meet India’s humungous demand for crude. Iran, will, therefore, continue to be a key supplier despite America’s displeasure over the matter.
What is BIMSTEC and why Nepal is a reluctant participant in it ….
BIMSTEC stands for Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) countries. It was formed in 1997 with Bangladesh, Bhutan, India Myanmar, Nepal, Sri Lanka and Thailand. To foster mutual trust and cooperation,
a six-day joint military exercise was planned to take place in Pune from September 10. Nepal’s chief of army staff Purna Chandra Thapa was to come to Pune for the closing ceremony. But, in the last moment, under instructions from the Nepalese prime minister Oli, the Nepalese military contingent has pulled out of the joint military contingent has pulled out of the joint exercise causing a lot of embarrassment to the hosts.
Prime Minister Oli sees the joint exercise as an India-dominated show that could irk the Chinese side. Apart from this, Nepal sees no great benefit to itself in participating in this joint military exercise. Some opposition parties, along with a few voices from within Oli’s party have questioned the rationale behind Nepal taking part in the exercise.
In any case, Prime Minister Modi’s plan to befriend Nepal closely seems to have gone awry.