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JUN 29 2018

India braces for life without Iran oil, mulls Plan B

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 29th JUN 2018

 

India appears to be bracing for life without Iranian oil and preparing Plan B after the US administration under President Donald Trump has declared zero tolerance against any country or entity that flouts its diktat to stop buying crude from Iran after November 4 when the 180-day wind-down period ends.

Officially, India maintains it only recognizes UN sanctions and will take up the issue with the US at appropriate fora. But the sound bytes emanating from Washington leave little doubt that India may have very little room for manoeuvre and may have to stop Iranian oil flowing onto its refineries.

An indication of New Delhi’s predicament came from oil minister Dharmendra Pradhan on Thursday when he told reporters in Mumbai that the government will go by “national interests”. “In fact, there is not a single oil-producing country from where we don't buy crude today. So there is no threat of supply disruptions because of the latest threat of US sanctions.”

Indeed, finding replacement for Iranian oil isn’t a problem. Iraq, Saudi Arabia and Kuwait can fill the gap. There will be some incremental increase in costs as they may not give the kind of economic sweeteners on freight and insurance that Iran offers. Iran is India’s third-largest oil supplier.

For India, the real challenge is balancing its age-old relations with Tehran and the financial/strategic

stake in the Chabahar port project with the imperative of avoiding US clampdown.

Unlike sanctions under Barack Obama’s presidency, when India had secured a waiver, Trump’s Washington is totally unforgiving. This time even China – the single-largest buyer of Iranian crude – too may not keep India company as it is trumped by $150-200 billion tariffs war.

New Delhi may, thus, find it difficult to even operate through the rupee payment mechanism like it had done in the past. Unsure of how things will pan out, the oil ministry on Thursday told state-run refiners to ready alternative sources.

“It is not like a final decision has been taken. But as a business proposition, you don’t expect refineries to wait till the last day before seeking alternative supplies. There are quantities to be contracted, logistics to be tied up, refinery feed tweaked. These take time,” one executive of a refining company said.

Private sector refiners Reliance Industries and Nayara, owned by Russia’s Rosneft, have already been winding down Iranian imports. State Bank of India, the country’s largest bank, has said it is giving up transactions for Iranian oil. Next in line could be insurers, who may refuse cover to vessels carrying Iranian oil or units that process that oil.

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Delhi Wind Oil Ministry Iraq Oil China Refinery Bank of India United States Saudi Arabia Russia Barack Obama Mumbai Iran India

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