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India’s oil ministry has told local refiners to get ready for a “drastic reduction or zero” oil imports from Iran, industry sources told Reuters on Thursday, a sign that India—Tehran’s second-largest oil customer—is bowing to pressure from the U.S. to reduce imports from Iran.
In the first weeks after the U.S. withdrawal from the Iran nuclear deal and the re-imposition of sanctions on Tehran, India said that it would continue to import Iranian crude despite U.S. sanctions, because India only honors sanctions imposed by the United Nations, but not ones introduced by individual countries.
But earlier this week, the U.S. asked its allies to cut oil imports from Iran to “zero” by early November when the U.S. sanctions on Tehran return, sending oil prices rising on expectations that more Iranian barrels could be taken off the market than expected as the U.S. Administration looks determined to choke off as much Iranian oil exports as possible.
In the previous period of sanctions on Iran’s oil, India was one of the few countries that continued to import Iranian oil, albeit at lower volumes because the U.S. and European sanctions at that time were choking most of the banking, shipping, and insurance processes.
This time around India could be forced to cut Iranian imports in order to protect its exposure to the U.S. financial system, industry sources told Reuters, adding that the oil ministry held a meeting with refiners today and urged them to look for alternatives to Iranian oil.
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“(India) has asked refiners to be prepared for any eventuality, since the situation is still evolving. There could be drastic reduction or there could be no import at all,” one of the sources with knowledge of the matter told Reuters.
Some Indian refiners, Nayara Energy and Reliance Industries, have reportedly started to reduce Iranian oil purchases due to their exposure to foreign investors and to the U.S. financial system.
India will not have problems replacing Iranian oil and could buy Basra Heavy (Iraq), Saudi, or Kuwaiti oil instead, an Indian source told Reuters.
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.