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Washington has granted India a waiver from the sanctions against Iran that snap back this Monday, the Economic Times reports, noting the waiver was secured after India agreed to reduce its Iranian oil imports by a third during financial 2018/19.
“India and the US have broadly agreed on a waiver. India will cut import by about 35% from last year (2017-18), which is a significant cut,” the Indian daily cited an unnamed source as saying.
Last financial year, India imported some 22 million tons of Iranian crude and had plans to increase this to 30 million tons in the next financial year. Instead, it will have to cut them to between 14 and 15 million tons, the source told the Economic Times.
Indian refiners began cutting their imports of Iranian oil imports a couple of months ago in preparation for the waiver.
India’s Foreign Minister stated earlier this year that New Delhi would not honor unilateral sanctions from the United States, but due to its exposure to the U.S. financial system it has had to lessen its reliance on Iranian crude. India is Iran’s second-largest oil client after China, which has also stated it will continue buying Iranian crude.
India imports as much as 80 percent of the oil it consumes, which makes it more vulnerable than other importers to price swings. This vulnerability has, in recent months, been heightened by a devaluation in the rupee, which has led to a considerable swelling in its oil bill. In August, government calculations revealed this bill could rise by as much as US$26 billion in financial 2018/2019 if prices remain high.
With such a deep cut to its Iranian oil imports, which came with an attractive discount, India’s oil bill could rise even higher, ultimately weighing on demand. Indian officials have said that U.S. oil could be an alternative to Iranian crude as long as its price was competitive.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.