India will stop importing crude oil from Iran following the US move to end sanction waivers, and will use alternate supply sources such as Saudi Arabia to make up for the lost volumes, top officials and industry sources said. The Trump administration decided not to renew waiver that let countries like India buy Iranian oil without facing US sanctions. “Until the waivers are not restored back, I don’t think India can buy oil from Iran. We will stop importing oil from Iran,” a top official said.
New Delhi is likely to press with the US government for continuation of beyond its expiry on May 2 in talks scheduled later this month, he said. “But purchases cannot be made in anticipation. We will not be importing any oil from Iran.” India was the second biggest buyer of Iranian crude oil after China. It bought some 24 million tonnes of crude oil from Iran in the fiscal ended March 31 (2018-19). Iran supplied more than a tenth of its oil needs. The shortfall will be made from alternate supply sources available in Saudi Arabia, Kuwait, UAE and Mexico.
Oil Minister Dharmendra Pradhan in a tweet said “a robust plan for an adequate supply of crude oil to Indian refineries” is in place. “There will be additional supplies from other major oil-producing countries; Indian refineries are fully prepared to meet the national demand for petrol, diesel & other petroleum products,” he said. The oil ministry too in a statement said a plan was in place to ensure supplies of crude oil from May when the waiver ends. Indian Oil Corp (IOC) Chairman Sanjiv Singh said refiners import crude oil from a wide range of sources and had been lining up alternate supplies for the past months.
Rising crude prices to roil CAD, rupee, inflation metrics
A possible increase in fuel prices due to the US sanctions on Iranian crude exports can have adverse impacts on the current account deficit (CAD), the rupee and inflation, warns a report. The country meets a tenth of its crude demand from Iran–making it the third largest customer for the Persian country–and the “immediate challenge” is to find alternate suppliers who will be able to deliver it at competitive prices as Tehran offers after May 2, Care Ratings said . A 10 percent spike in crude prices can result in a 0.40 percent widening of the CAD, which can consequently play out into a 3-4 percent depreciation in the rupee and also push up inflation by 0.24 percent, the ratings agency said.
Crude prices jumped to the highest level at USD 74 a barrel since November following the US announcement and equities also tumbled the worst in 2019 Monday. The rating agency report said if the crude prices remain around USD 75 a barrel for one more month, the Reserve Bank’s rate setting panel may postpone a rate cut which it is widely expected to announce in June. Rising crude prices can have a two-way impact on the domestic economy, which will play out on both the revenue and expenditure fronts, it said.
US sanctions over Iran oil will ‘intensify Mideast turmoil’: China
China warned that the US decision to impose sanctions on buyers of Iranian oil will “intensify turmoil” in the Middle East and in the international energy market. The White House announced Monday it was calling an end to six-month waivers that had exempted several countries — including major importer China — from unilateral US sanctions on Iranian oil exports.