India to Lose ‘Special Privileges’ If It Halts Iran Oil Imports

EghtesadOnline: Iran will end facilities provided to India if the latter embarks on replacing Iranian oil with that of other countries under the US unilateral sanctions, Iran's charge d'affaires said in New Delhi on Tuesday.

News ID: ۷۸۳۲۷۶

14 July 2018

"Iran has made every effort to secure different aspects of oil exports to India … Should India take in oil from countries like Saudi Arabia, Russia, Iraq, the US and others to offset cuts in Iranian oil, Tehran will end 'special privileges' already granted to the country," Masoud Rezvanian Rahaqi was also quoted as saying by IRNA.

He was speaking at a seminar on "emerging challenges and opportunities in the global diplomacy and its impact on bilateral ties with India".

According to Reuters, in an effort to retain customers for its oil in Asia, Iran has been offering India a hefty freight discount since the lifting of sanctions in 2016, Financial Tribune reported.

The senior diplomat said it was important to work together to safeguard bilateral ties through the adoption of instruments and mechanisms.

The US has told India and other countries to cut oil imports from Iran to "zero" by November 4 or face sanctions. The Trump administration brought back sanctions against Iran after pulling out the US from the Iran nuclear deal.

The news comes as India has asked refiners to look for alternative oil supplies as the nation may have to drastically cut imports from Tehran to comply with the renewed US sanctions.

This could be a clear change of stance from the country's initial defiant tone against the US unilateral sanctions.

"India does not recognize unilateral sanctions, but only sanctions by the United Nations," Sunjay Sudhir, joint secretary for international cooperation at India's Petroleum Ministry, had told CNN earlier this month.

But what seems to be apparent is that the Indian refiners are already trying to scale down their purchases from the Persian Gulf country.

Earlier in May, Indian Oil Corporation, the country’s top refiner, announced that it will turn to its traditional oil suppliers, mostly in the Middle East, if US sanctions against Iran result in supply disruptions, Reuters reported.

--- Supply Down

India’s oil imports from Iran declined by 15.9% in June.

In June, India imported 592,800 barrels per day of oil from Iran compared to 705,200 bpd in May, the data showed. The sources declined to be identified.

Lower purchases by private refiners dragged down India’s June imports from Iran, although state refiners stepped up purchases.

State refiners, accounting for about 60% of India’s nearly 5 million bpd of refining capacity, lifted about 10% more Iranian volumes in June compared to May, at about 454,000 bpd, the data showed.

This is while, according to Rezvanian, Iran has been a reliable energy partner for India, which has always followed a "rational pricing" of oil ensuring the interest of both consumers and suppliers.

"If India were to replace Iran with other suppliers for the 10% of its oil demand, then it may have to revert to dollar-denominated imports, which means higher current account deficit as well."

Indian state refiners had cut oil imports from Iran in the fiscal 2017-18 because of a dispute over development rights for an Iranian natural gas field. However, state refiners had drawn plans to raise imports in the current fiscal year starting in April after Iran offered free shipping and an extended credit period of 60 days.

In April to June 2018, the first quarter of this fiscal year, India’s oil imports from Iran rose by about 24% to about 647,000 bpd from the previous quarter, the data showed.

Imports by state refiners during the period more than doubled to about 413,400 bpd from 191,700 bpd, the data showed.