• 3 minutes Is California becoming a National Security Risk to the U.S.?
  • 9 minutes Oil Prices
  • 14 minutes Gaming the Price of Oil
  • 1 min Could EVs Become Cheaper than ICE Cars by 2023?
  • 10 hours DOW down as tech shares plummet
  • 2 hours MBS Isn't Going Anywhere
  • 8 hours Black (Oil) Market: U.S. Sanctions Russian Companies to Choke Off Oil for Syria
  • 9 hours Santa Drives A Tesla, Not a Sleigh-- I KNEW IT.
  • 33 mins Can U.S. Add "Another Russia" to Oil Supply?
  • 2 hours Regular Gas dropped to $2.21 per gallon today
  • 4 hours France Revolts Against Anti - Carbon Tax
  • 7 hours Why does US never need to have an oil production cut?
  • 6 hours Your idea of oil/gas prices next ten years
  • 10 hours Plastic Myth-Busters
  • 12 hours EVs Set to Become the Biggest Battery Users
  • 11 hours Fishermen Sue Oil Companies Over Rising Ocean Temperatures
Alt Text

Why The EU Can't Save Iran

The EU’s plans to create…

Alt Text

These Nations Are The Hardest Hit By Iran Sanctions

Azerbaijan is in an increasingly…

Alt Text

The Saudis Are Hinting At Another U-Turn In Oil Markets

Many analysts believe that U.S.…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

India And China Could Mitigate Damage For Iran

How much oil from Iran will be disrupted because of U.S. sanctions? American officials have gone back and forth on this, but many of the people who decide how much Iranian oil will be knocked offline are located in India and China.

In recent months, both India and China each purchased more than 600,000 bpd from Iran. Together, that amounts to about 60 percent of Iran’s oil exports, which makes them hugely important to the efficacy of U.S. sanctions.

It is unclear which way India will go. Because of its proximity, and its growing thirst for oil, India is a major buyer of Iranian oil. But the Indian government of Narendra Modi has had a positive relationship with both the Obama and Trump administrations, no small feat. While Trump has damaged the relationship between the U.S. and a lot of countries, India has managed to avoid his wrath.

That would likely change if India scoffed at U.S. sanctions on Iran and continued to import oil. But India’s need for imported oil puts it in a bind, especially with higher fuel prices causing some unease among its populace. It could be costlier to cut out purchases from Iran and buy oil elsewhere. And during the last round of sanctions, prior to the 2015 Iran nuclear deal, India was one of the few countries that continued to buy oil from Iran.

Since the U.S. scrapped the nuclear accord with Iran in May, reports suggest that Iran has offered India “virtually free shipping and an extended credit period of 60 days,” enticements intended to keep India from cutting off Iran. “We can buy Basra Heavy, Saudi or Kuwait oil to replace Iran. Finding replacement barrels is not a problem, but it has to give the best economic value,” a source in New Delhi told Reuters last month.

But other signs suggest that Modi’s government is moving to comply with Washington’s demands. In June, Reuters reported that India’s oil ministry told the country’s top refiners to prepare for a “drastic reduction or zero” imports of oil from Iran.

Related: Wood Mackenzie: Global Peak Oil Demand Expected In 2036

Some argue that India could import oil from the U.S., which would serve several purposes at once. It could provide India with an alternative source of oil, it would also cut the U.S. trade deficit with India, and it would create good will with the Trump administration as it goes on its trade warpath. India could conceivably win steel tariff exemptions if it complies with U.S. demands vis-à-vis Iran.

“The upcoming sanctions on Iran provide a golden opportunity to commercialize more U.S. oil in the Indian market,” Abhishek Kumar, a senior energy analyst at Interfax Energy in London, told Bloomberg. “Escalating trade tensions between the U.S. and China will also be conducive to more U.S. oil coming to the Indian market.”

China, on the other hand, is in an entirely different situation. Open trade war between the U.S. and China could actually push Beijing into buying more oil from Iran, not less. On top of that, with refiners in Europe, Japan and South Korea already beginning to curtail purchases from Iran, there is a lot of supply from Iran that is looking for a home. Iran will likely offer discounts to Chinese refiners, and China might readily scoop up ample supplies on the cheap. “We don’t have any problem selling our oil” to China, an Iranian official told the Wall Street Journal.

Even more enticing to China is the possibility of conducting the trade in yuan, which would serve the dual objective of elevating the Chinese currency and bolstering the Shanghai oil futures contract. Europe may even quietly support more Chinese purchases of Iranian oil in an effort to keep the nuclear deal alive.

Meanwhile, President Trump just threatened to escalate the trade war to yet a new level. In a CNBC interview that aired on Friday Trump said he was willing to slap tariffs on basically every imported good from China. "I'm ready to go to 500," Trump said, referring to the $505 billion in total U.S. imports from China last year.

Related: U.S. Poised To Ease Biofuel Quotas

Few analysts expect China to buckle under the pressure. The trade war would just intensify if Trump moves forward. Buying as much oil from Iran as possible would be one way of retaliating against Washington’s demands.

To a large extent, the total volume of oil disrupted from Iran due to sanctions will be determined by how much the U.S. wants to tighten the screws. A State Department official said in June that the objective would be cutting Iranian oil exports to “zero,” comments that sent oil prices skyrocketing. Since then, the U.S. government has softened its tone somewhat, with Secretary of State Mike Pompeo suggesting that he would “consider” waiver requests.

However, even if the U.S. wants to apply “maximum pressure,” China and India, which together account for nearly two-thirds of Iran’s oil exports, still hold a lot of the cards.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • Mamdouh G Salameh on July 22 2018 said:
    China and India have a great sway over the global oil market and Iran's oil exports being major buyers of Iranian crude. Between them they imported a total of 15.19 million barrels a day (mbd) in 2017 accounting for 22.5% of global oil imports. They also imported 726,000 barrels a day (b/d) and 705,000 b/d of Iranian crude respectively in 2017 accounting for 67% of Iran’s oil exports of 2.125 mbd. They could, on their own, ensure that US sanctions against Iran will fail. However, their attitudes and motivations vis-à-vis US sanctions are different.

    India will never halt its imports of Iranian crude no matter what pressure the United States puts on it. India announced that it doesn’t recognize any sanctions but UN sanctions and that it will ignore US sanctions on Iran and continue to import Iranian crude. In a nut shell, India has been angling for a better deal from Iran and it got it.

    Iran is reported to have offered India virtually free shipping of crude cagoes and an extended credit period of 60 days,” as enticements so as to continue buying Iranian crude. With oil prices on the rise, it could be costlier for India to cut out purchases from Iran and buy oil elsewhere. And during the last round of sanctions, prior to the 2015 Iran nuclear deal, India was one of the few countries that continued to buy oil from Iran. Moreover, India already has barter trade agreement with Iran to facilitate bilateral trade and bypass US sanctions.

    China, on the other hand, is in an entirely different situation. China is not going to comply with US sanctions against Iran. With the United States intensifying its trade war against it, China would have an incentive to buy more Iranian crude as a way of retaliating against Washington and also bolstering the petro-yuan. Furthermore, Iran will likely offer significant discounts to China thus enticing it to scoop up ample supplies on the cheap.

    US sanctions on Iran are doomed to fail for two reasons. One is that the overwhelming majority of nations of the world including US allies and major buyers of Iranian crude are against the principle of US sanctions in general and particularly the sanctions on Iran. They resent the tendency of the United States to slap sanctions on any country with which it doesn’t see eye to eye. Another reason is the petro-yuan which has virtually nullified the effectiveness of US sanctions and also provided a viable alternative to bypass the petrodollar altogether.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Bonaventure Stephen Gomes on July 23 2018 said:
    Donald Trump is playing the role of The Godfather replicating the character of Don Vito Corleone as portrayed by Marlon Brando Jr. In a catch-22, many countries are forced to play the Goodfellas. Countries like China, India and South Africa are dependent on Iranian oil, however India, while historically tied to Iran for several centuries, is also beholden to Saudi Arabia, and the United Arab Emirates, respectively for oil, and investments. And The Godfather is watching over all of them.
  • Vishwas on August 19 2018 said:
    Iran sanctions seem to be at the behest of Saudis and to help American oil companies. However, it may backfire on Saudi as China may import 100% Iran oil at cheap rate. Saudi will lose its sales to China and so the American oil companies. Attempts to physically stopping Chinese oil tankers too risky even for America. I expect oil rates to fall to $60 after 4 Nov. Saudi's cannot afford to lose exports though they pretend to not so. Saudi company's $ 1 trillion IPO dream over now.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
-->