Can Donald Trump's Advisory to Disrupt the Indian Oil Imports Equation with Iran?

The latest and the most dramatic urge that the US leadership made to Narendra Modi’s foreign trade policy especially with regards to Iran, has made the entire Asian Oil market under high pressure. Reports have started coming in that India is working on a plan to control Oil Imports from Iran. The question remains, is this reaction is a result of US’ recommendations or is it a plan for some better value for India?

A quick Analysis by Faiz Askari

Crude oil importers are scrambling for a solution to their Iranian problem after earlier this week the U.S. State Department urged all U.S. allies to completely suspend their Iranian imports by November 4—the date when the new sanctions against Iran’s oil industry kick in. This advisory has come to India as well.

Following this announcement, oil prices jumped, with analysts rushing to revise upwards their estimates of how many Iranian barrels will be lost to the world oil market from November onwards. Following this statement, stock market investors have started showing strange reaction towards oil & gas related stocks in BSE and NSE.

However, nothing is certain at this point although the scales are tipped to the U.S. despite declarations that they will continue importing Iranian oil or actively seek waivers from the sanctions, a number of crude oil buyers from South Korea, India, and Japan have started cutting their shipments from Iran.

Whatever, maybe the situation, the current condition with regards to global oil markets is not very stable and this is expected to reflect a disruption on global stock markets. Yes, experts are also considering that the coming few days stock markets are expected to react negatively from this latest episode.

Now, by looking at India and Iran relations, in the previous period of sanctions on Iran’s oil, India was one of the few countries that continued to import Iranian oil, albeit at lower volumes because the U.S. and European sanctions at that time were choking most of the banking, shipping, and insurance processes. This was one of the main reasons that initially, India also took serious participation in upcoming Iranian infrastructure success story of Chabahar Port.

Moreover, experts from the industry also believe that this time around India could be forced to cut Iranian imports in order to protect its exposure to the U.S. financial system. The oil ministry under the leadership of Dharmendra Pradhan conducted a series of meetings with refiners in last few days and explored possible alternatives to Iranian oil.

All this is expected to impact the Oil and Gas companies stocks in this week. Both Sensex and Nifty are going to witness investors’ reaction towards oil sector.