India Will Continue To Buy Iranian Oil and Defy the US

Will India defy the US threat and sanctions for Iranian Oil? After the S-400 Deal with Russia, New Delhi has asserted that it will continue to buy oil from Iran. In the first clear evidence of India’s readiness to maintain trade with Iran, state refiners have contracted import of 1.25 million tonnes of crude oil from the Persian Gulf and is preparing to replace dollar payments with rupee trade.

According to Indian media reports, sources from the Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL) have contracted 1.25 million tonnes of Iranian oil for import in November. US sanctions against Iran kick in from November 4, which will block payment routes.  Sources said India and Iran are discussing reverting to rupee trade after November 4.

While India wants to continue importing Iranian oil, (at a reduced volume), US Secretary of State Mike Pompeo last month stated that Trump administration would consider waivers on the embargo but made clear that these would be time-limited, if granted.

Sources said IOC is importing the “usual” monthly volumes of oil from Iran. It had planned to import of 9 million tonnes of Iranian oil in the 2018-19 fiscal (April 2018 to March 2019).

“Iran has been off-and-on taking rupee payments for oil it sells. This rupee it uses for paying for imports of medicines and other products. A similar arrangement is in works,” a source said.  Oil refiners such as state-owned IOC and MRPL could use UCO Bank or IDBI Bank to route oil payments to Iran, sources said.

India had planned to import about 25 million tonnes of crude oil from Iran in the current fiscal, up from 22.6 million tonnes imported in 2017-18. But the actual volumes imported may be far less as companies like Reliance Industries have totally stopped buying oil from Iran and others too are scaling it down in hope of winning a sanction waiver from the US.

Sources said Iran is open to accepting rupee payment for oil and may use the money to pay for equipment and food items it buys from India.  Currently, India pays its third largest oil supplier in euros using European banking channels. These channels would get blocked from November.

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