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As U.S. sanctions on Iran are about to kick in later this year, Indian oil refiners reduced their orders for Iranian crude oil in June by 12 percent compared to May, India’s Oil Minister Dharmendra Pradhan said in Parliament on Monday.
Some big Indian refiners worry that their access to the U.S. financial system could be cut off if they continue to import Iranian oil, and have started to reduce purchases from Tehran.
Yet, last month’s Indian imports from Iran were still higher than imports in June 2017, when Indian refiners had slashed imports from Iran, in a possible retaliation for Tehran not awarding the development of a gas field in Iran to Indian firms.
“Indian refineries imported 1.9 million tonnes of crude oil from Iran in June 2017 and placed orders for 2.82 million tonnes in June 2018,” Reuters quoted Pradhan as telling the lower House of Parliament today.
After the snub in the previous Indian fiscal year, in the current fiscal year beginning in April, India has increased oil imports from Tehran. Iran overtook Saudi Arabia as India’s number two oil supplier in the April-June quarter, with Iraq holding onto its number-one supplier spot.
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Iran is eager to continue to sell its crude oil to India—its second-largest single oil customer after China—even as some Indian refiners are said to be thinking of reducing oil imports from Iran for fear of running afoul with the U.S. sanctions and having their access cut off to the U.S. financial system. So Iran has started to offer India cargo insurance and tankers operated by Iranian companies as some Indian insurers have refused to cover oil cargoes from Iran in the face of the returning U.S. sanctions.
Last week, Hindustan Petroleum was said to have cancelled a crude oil shipment from Iran after its insurer refused to provide coverage for the cargo on concern about U.S. sanctions.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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 is angling for a better deal from Iran and it got it.
Iran is reported to have offered India “virtually free shipping and an extended credit period of 60 days,” as enticements intended 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.
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.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London