India will defy US sanctions and continue importing oil from Iran after a November 4 deadline, easing concerns over the country’s energy security but setting up a possible showdown with Washington.
Petroleum Minister Dharmendra Pradhan said two state-owned oil refiners, Indian Oil Corporation and Mangalore Refinery and Petrochemicals, had signed contracts to import 1.25 million metric tons of Iranian oil next month, Mint newspaper reported.
Reuters said that Indian Oil would buy 6 million barrels of oil and Mangalore Refinery and Petrochemicals 3 million barrels.
The administration of US President Donald Trump reimposed an initial tranche of economic sanctions on Iran in August, and will implement a second tranche in November. Last applied from 2012 to 2015, the sanctions are in retaliation for Iran’s supposed nuclear proliferation program.
Secretary of State Mike Pompeo said on a visit to India in September that some waivers from the sanctions might be granted to countries buying Iranian oil, but only if they agreed to cut their imports to zero. Pradhan admitted on Monday he was not sure India would get a waiver.
The world’s third-largest oil importer, India relies upon Iran for 9.4% of its crude-oil supplies: In fiscal year 2017-18 the country brought in 220.4 million metric tons of oil from a number of sources.
India also continued to buy Iranian oil in 2012-2015, but shipments had to be sharply reduced to avoid exposure to the US financial system. However, this time it is likely to skirt Washington’s embargo on dollar payments by using rupees, while payments will probably be routed through Indian banks to avoid any US financial intervention.
Oil prices have soared in response to fears of supply cutbacks, putting pressure on the Indian economy and leaving New Delhi with few options. Brent crude prices are now hovering around US$86 a barrel and global traders are betting that they will go past $100. The weaker rupee has also pushed up procurement costs for Indian buyers.
New Delhi is hopeful that Saudi Arabia and other members of the Organization of Petroleum Exporting Countries will heed US calls for production to be boosted by 1 million barrels per day, as promised in June, which might help bring benchmark prices down.