India works out plan to keep Iran oil flowing

NEW DELHI: Signalling India’s resolve to continue its trade ties with Iran, state-run IndianOil and Mangalore Refinery and Petrochemicals Ltd have contracted to buy crude from the West Asian nation in November, a move that will ease pressure on oil prices.


While arrangements for the purchase have been worked out, sources told TOI that during its discussions with US authorities, the government has stated its inability to stop the flow of Iranian crude. Iran is the second-largest source of crude for Indian refiners after Iraq.

The oil deal has been sweetened by the prospects of New Delhi exporting rice and medicines to Tehran to balance the trade deficit.

India is also seeing the Chabahar port as a strategic investment that gives it access to Afghanistan and has been trying to work out a rupee-based payment settlement arrangement involving UCO Bank and Iran’s Bank Pasargad, a mechanism that may be extended to crude purchases. Sources, however, refused to comment on the issue as also the issue of reinsurance to cover the risk of shipments.

Government sources said state refiners have contracted to import 1.25 million tonnes of crude from Iran in November.

US sanctions

against Iran are due to kick in on November 4, which will block payment avenues. India had planned to import around 25 million tonnes of crude from Iran this year, as against 22.6 million tonnes in 2017-18, although actual imports may be lower since companies such as Reliance and Nayara have stopped purchases, while some others may scale down.

Several countries such as Japan, South Korea, Sri Lanka and members of the European Union are expected to slash shipments from Iran, while India is keen to continue imports. Last month, US secretary of state Mike Pompeo said Washington would consider waivers on the embargo but made clear that these would be time-limited, if granted. In May, US President Donald Trump withdrew from the 2015 nuclear accord with Iran, re-imposing sanctions against the West Asian nation. Some sanctions took effect from August 6 while those affecting the oil and banking sectors will start from November 4.

Continued oil flow from Iran is seen to be crucial for global crude prices, which are already trading above $80 a barrel and have upset the government’s current account calculations as the rupee remains in free fall.