‘India to continue with Iranian oil imports despite U.S. sanctions’

October 9, 2018 - 3:0

TEHRAN - In a significant development that is likely to raise eyebrows in Washington, two major Indian oil companies have placed orders to import Iranian crude next month, in defiance of U.S. sanctions.

Indian Oil Minister Dharmendra Pradhan, speaking at an event titled ‘The Energy Forum’ in New Delhi on Monday, reaffirmed India’s commitment to bolster oil trade with Iran, saying New Delhi did not know whether it would receive a waiver from U.S. sanctions.

On Friday, India’s state-run news agency PTI quoted sources to report Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) have contracted 1.25 million tonnes of Iranian oil for import in November.

“Iran has been off-and-on taking rupee payments for oil it sells. This rupee it uses for paying for imports of medicines and other commodities. A similar arrangement is in works,” a source told PTI, adding details of the payment mechanism would emerge in the next few weeks.

Mr. Pradhan further said that the country was considering evolving a different payment system to import Iran’s oil and that it could pay using Indian rupees, in an attempt to dump the U.S. dollar.

Earlier this week, a report in Economic Times said, citing a government official familiar with the situation, that the Reserve Bank of India and Ministry of Finance had been tasked with exploring the viability of rupee and barter-based trade agreements with crude oil producing nations such as Russia, Iran and Venezuela.

These developments are seen as a rebuff to Trump's administration call to countries to completely cut oil trade with the Islamic Republic of Iran. U.S. sanctions against Iran's crude oil exports come into force from November 4, so Washington has been ratcheting pressure, but to no avail.

Trump administration has failed to garner international support against the Iran deal, which Tehran has continued to abide by even after the unilateral withdrawal of the U.S. Last month, the EU announced that China, France, Germany, Russia and the U.K. would develop an alternative payment system to skirt the U.S. and continue doing business with Iran. India seems to be following the suit.

Iran is India's third-largest oil supplier after Iraq and Saudi Arabia. It was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but the crippling U.S. sanctions against Iran led to significant reduction of oil imports.

In the previous round of U.S. sanctions on Iran from 2012 to 2015, India continued to purchase Iran's oil although the volume of oil trade decreased.

In 2013-14 and 2014-15, India bought 11 million tonnes and 10.95 million tonnes respectively from it. Sourcing from Iran increased to 12.7 million tonnes in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 million tonnes to catapult it to the third spot.

Iranian oil is lucrative for Indian refiners as it provides 60 days of credit for purchases, something that refiners in other countries don’t provide, including in Saudi Arabia, Kuwait, Iraq, Nigeria, and the US.

The popular opinion in India favors India’s continued oil trade with Iran. In an article on Firstpost website, analyst Suhit Sen wrote that “no country is bound to play along with Uncle Sam’s ingrained prejudices and strategic interests”, referring to International Court of Justice’s (ICJ) recent ruling that the sanctions against Iran must be lifted, especially those pertaining to movement of humanitarian goods.

The BJP led government in New Delhi is under tremendous pressure from opposition parties and general public to defy the U.S. sanctions and continue importing oil from Iran, which they believe is India’s ‘time-tested ally’.

In a significant development that is likely to raise eyebrows in Washington, two major Indian oil companies have placed orders to import Iranian crude next month, in defiance of U.S. sanctions.

Indian Oil Minister Dharmendra Pradhan, speaking at an event titled ‘The Energy Forum’ in New Delhi on Monday, reaffirmed India’s commitment to bolster oil trade with Iran, saying New Delhi did not know whether it would receive a waiver from U.S. sanctions.

On Friday, India’s state-run news agency PTI quoted sources to report Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) have contracted 1.25 million tonnes of Iranian oil for import in November.

“Iran has been off-and-on taking rupee payments for oil it sells. This rupee it uses for paying for imports of medicines and other commodities. A similar arrangement is in works,” a source told PTI, adding details of the payment mechanism would emerge in the next few weeks.

Mr. Pradhan further said that the country was considering evolving a different payment system to import Iran’s oil and that it could pay using Indian rupees, in an attempt to dump the U.S. dollar.

Earlier this week, a report in Economic Times said, citing a government official familiar with the situation, that the Reserve Bank of India and Ministry of Finance had been tasked with exploring the viability of rupee and barter-based trade agreements with crude oil producing nations such as Russia, Iran and Venezuela.

These developments are seen as a rebuff to Trump's administration call to countries to completely cut oil trade with the Islamic Republic of Iran. U.S. sanctions against Iran's crude oil exports come into force from November 4, so Washington has been ratcheting pressure, but to no avail.

Trump administration has failed to garner international support against the Iran deal, which Tehran has continued to abide by even after the unilateral withdrawal of the U.S. Last month, the EU announced that China, France, Germany, Russia and the U.K. would develop an alternative payment system to skirt the U.S. and continue doing business with Iran. India seems to be following the suit.

Iran is India's third-largest oil supplier after Iraq and Saudi Arabia. It was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but the crippling U.S. sanctions against Iran led to significant reduction of oil imports.

In the previous round of U.S. sanctions on Iran from 2012 to 2015, India continued to purchase Iran's oil although the volume of oil trade decreased.

In 2013-14 and 2014-15, India bought 11 million tonnes and 10.95 million tonnes respectively from it. Sourcing from Iran increased to 12.7 million tonnes in 2015-16, giving it the sixth spot. In the following year, the Iranian supplies jumped to 27.2 million tonnes to catapult it to the third spot.

Iranian oil is lucrative for Indian refiners as it provides 60 days of credit for purchases, something that refiners in other countries don’t provide, including in Saudi Arabia, Kuwait, Iraq, Nigeria, and the US.

The popular opinion in India favors India’s continued oil trade with Iran. In an article on Firstpost website, analyst Suhit Sen wrote that “no country is bound to play along with Uncle Sam’s ingrained prejudices and strategic interests”, referring to International Court of Justice’s (ICJ) recent ruling that the sanctions against Iran must be lifted, especially those pertaining to movement of humanitarian goods.

The BJP led government in New Delhi is under tremendous pressure from opposition parties and general public to defy the U.S. sanctions and continue importing oil from Iran, which they believe is India’s ‘time-tested ally’.

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