US curbs: India cuts June oil imports from ally Iran by 25%
New Delhi: India's oil imports from Iran showed a decline of over 25 per cent in June, but some shipments loaded last month are expected to arrive this month, government and industry officials said on Wednesday.
After scaling imports to around 770,000 barrels per day in May, imports from Iran were down to 570,000 bpd in June as India considers acquiescing to US President Donald Trump's demands for ending oil imports from Iran by November 4.
Officials said actual shipment reaching Indian shores has shown a decline but some of the oil that was loaded in June arrived this month and has not been accounted for in the June numbers.
While New Delhi says it does not recognise unilateral restrictions imposed by the US on any country and instead follows UN sanctions, oil firms have been asked to be prepared for channels to pay for Iranian oil getting blocked by November, following sanctions against the Persian Gulf nation, they said.
Russia's Rosneft-based Nayara Energy and private sector Reliance Industries as well as state-owned Indian Oil Corp (IOC) showed lesser Iranian purchases, but Mangalore Refinery and Petrochemicals Ltd (MPRL) sourced more oil.
Imports from Iran, which currently is India's third largest supplier of oil after Iraq and Saudi Arabia, are likely to come down gradually and will have to be replaced with more purchases from countries like Saudi Arabia and Kuwait, they said, adding imports from Iran after November 4 will be possible only if Iran accepts alternates like rupee payments.
The Trump administration is piling pressure on India, China, and other buyers to end all imports of Iranian oil by a November 4 deadline as it looks to choke the Persian Gulf state's economic lifeline with sanctions over its nuclear programme.
The US, which in May pulled out of a landmark nuclear deal and said sanctions will be re-imposed on Iran within 180 days, has threatened to cut off access to the American banking system for foreign financial institutions that trade with Iran.
This means India, Asia's second-largest importer after China, will have to give up the euro payment mechanism for Iranian crude imports from November when US sanctions against Iran come into force.
But, it still could continue imports if Iran accepts an alternative payment or offers a longer credit period.
State Bank of India (SBI), the country's largest lender, has communicated to oil refiners that the euro payment route will be not available after November 3. The current payment mechanism involves Indian refiners transferring funds to SBI when they use Germany-based Europaeisch-Iranische Handelsbank to pay euros to Iran.
During the first round of sanctions in 2012 when European Union (EU) joined the US in imposing financial restrictions, India initially used a Turkish bank to pay Iran for the oil it bought but beginning February 2013 paid nearly half of the oil import bill in rupees, while keeping the remainder pending till opening of payment routes.
It began clearing the dues in 2015 when the restrictions were eased.
Besides, New Delhi had sought to get around the restrictions by supplying goods, including wheat, soybean meal and consumer products to Iran in exchange for oil.
Back in 2012, EU put restrictions on insurance of Iranian oil and ships carrying them. To get around the problem, Iran supplied oil in its own tankers.
Iran supplied 18.4 million tonnes of crude oil during April 2017 and January 2018 (first 10 months of 2017-18 fiscal).
Iran was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11 but western sanctions over its suspected nuclear programme pushed it to the 7th spot in the subsequent years. Sourcing from Iran increased following the lifting of sanctions.
Iranian oil is a lucrative buy for refiners as the Persian Gulf nation provides 60 days of credit for purchases, double the amount of time given by other producers.
Following Trump's announcement, companies are not allowed to strike new deals in the Iranian oil and energy sector.
By August, transactions in Iranian government debt or currency and purchases involving the country's automobile sector or Iranian gold and other metals must end. In November, deals involving Iran's oil and energy sector, shipping and ports, and insurance services will be prohibited.