India holds high-level meeting on oil, gas while imports from Iran stops

June 7, 2019

TEHRAN- In a high-profile meeting chaired by Home Minister Amit Shah on Tuesday, top ministers of the Narendra Modi government held talks on the issue of investment in petroleum and gas sector a month after the U.S. waiver for India to import oil from Iran came to an end, The Statesman reported on Friday.

The 40-minute meeting, chaired by Amit Shah, was attended by Finance Minister Nirmala Sitharaman, External Affairs Minister S Jaishankar, Petroleum and Natural Gas Minister Dharmendra Pradhan and Railways and Commerce Minister Piyush Goyal.

NITI Aayog CEO Amitabh Kant was also present.

The meeting was on petroleum issue, said a source, but refused to divulge details.

The meeting gains significance as the Trump administration recently told India, China, Turkey and a few other oil customers of Iran that no waiver on sanctions would be granted to them after 1 May, ending six months of exception to the sanctions.

The U.S. had granted exemptions to India, China, Japan, South Korea and Turkey “to ensure a well-supplied oil market” in November last year for six months after it re-imposed sanctions on the Persian nation.

India is said to be in touch with the U.S. to seek further extension of the waiver on oil imports from Iran, pointing out that it has been gradually reducing its energy purchases from the Islamic country.

Two weeks after the U.S. decision came into force, Iranian Foreign Minister Mohammad Javad Zarif travelled to India and met the then External Affairs Minister Sushma Swaraj. After her meeting with Zarif, she had said a decision on India’s oil imports will be taken after the elections keeping in mind India’s commercial considerations, energy security and economic interests.

Following the withdrawal of the U.S. waiver, India has stopped contracting oil shipments from Iran.

With 80 percent of India’s requirements being met through imports, higher-priced oil from non-Iranian sources can make a big dent in the country’s current account deficit and forex reserves.

Oil imports from Iran in the past fiscal ended March amounted to about $9 billion, as per industry figures.

Official sources have said that getting oil from alternative sources would have financial implications and lead to further pressure when crude touches $75-80 per barrel in the near-term, putting pressure on India’s import bill.

Iran used to offer India a longer credit period of 60 days compared to other crude suppliers, while the cargo insurance was free, the sources said.

Imports from Iraq, UAE and Saudi Arabia will now be on the higher side, without some of the benefits that Iran was giving, they added.

India has been Iran’s second largest customer of oil, after China.

Late last month, India had announced that the country was planning to resume oil imports from Iran and the new government was going to hold talks with Iran in order to discuss ways of getting around U.S. sanctions like paying in national currencies.

“The Modi government will immediately initiate talks with Iran to discuss steps that will allow it to resume oil imports,” India digital news portal The Print reported quoting government sources.

According to the sources, Iran’s Pasargad Bank and India’s Reserve Bank could be used to arrange the payments.

“Payments can be deposited in the Iranian bank and then Iranian authorities can decide how to utilize the money,” a senior government official who didn’t wish to be identified said.

“These talks have been held earlier too but got stalled due to elections. They will be revived and this will be one of the first focus areas of the government.” the official said.

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