India plans to further cut imports from Iran by 13 per cent next fiscal even though easing of US and western sanctions has made buying crude oil from the Persian Gulf nation easier.
Secretary of State Mike Pompeo said that countries like India, if it gets the exemption, would be asked to bring down their oil imports from Iran to zero in six months' time.
In a temporary reprieve, India will pay for Iranian crude oil in euros through a German bank based in Hamburg, while a permanent solution to the payment issue will be explored at a meeting in Teheran next week.
Whatever be India's course of action, it will have an impact on India-Iran ties, notes Aveek Sen.
'Geopolitical stability could remove the crude oil risk premium.'
'Had a very fruitful meeting with Iranian defence minister Brigadier General Amir Hatami in Tehran. We discussed regional security issues including Afghanistan and the issues of bilateral cooperation,' Singh said in a tweet.
India's pharmaceutical exports to Iran have been hit owing to depleting rupee reserves in the West Asian country because of India stopping the import of crude oil from it in 2019 following US sanctions. Pharmaceutical exports dropped 71.25 per cent in April-August this year over the same period last year. The data from the Pharmaceutical Exports Promotion Council (Pharmexcil) showed exports to Iran had declined 31.29 per cent in 2022-23 as against the previous financial year.
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.
Given that India will get a huge part of its oil supplies from Iran through its government-owned oil PSUs, any unwelcome shocks in global crude rates could be absorbed well enough.
One of the major advantages of buying Iran crude is the additional credit period of 90 days that the country gives to India, compared to 30 days by other countries.
Western sanctions aimed at crippling Iranian finances by drying up buyers for its crude oil, had last year banned insurance cover to ships carrying Iranian oil.
Iran has offered discounts on crude oil price and free shipping if India agrees to buy more of its oil.
Oil prices jumped nearly $3 a barrel and gold and safe-haven bonds rallied on Friday after the killing of top Iranian commander Qassem Soleimani in an airstrike by the US in Baghdad.
Indian Navy's destroyer INS Kochi responded following the attack on the vessel, MV Andromeda Star, on April 26, officials said, adding all the crew members are safe.
In order to facilitate purchase of crude oil from Iran, the Finance Ministry has issued a notification exempting payments made in Indian rupee for such imports from any local tax.
Oil accounts for about a third of India's total imports and higher dollar prices combined with a rupee near all-time lows have increased its cost.
India is the second largest buyer of Iranian crude, after China.
The sanctions have a singular purpose, denying the world's largest state sponsor of terrorists the capacity to do things like they did this past couple weeks, attempted assassination campaign in the heart of Europe, said US Secretary of State Mike Pompeo.
A spokesman for Gibraltar's government also confirmed that police proceedings against four members of the crew had ended.
Faced with soaring demand, stagnant output at home and a need to diversify from Iranian crude imports lost to Western sanctions, Indian oil companies are hungry for deals like Oil and Natural Gas Corporation's ( ONGC's) Kashagan buy that promise supplies sooner rather than later.
Iran has offered to help India meet its energy needs by relaunching rupee-rial trade for export of oil and gas, said Iranian ambassador to India Ali Chegeni. Chegeni said if both the countries resume rupee-rial trade, bilateral trade can touch $30 billion. Iran used to be India's second largest oil supplier but New Delhi had to halt imports after the former US president Donald Trump withdrew from the nuclear deal with Iran and re-imposed sanctions on its oil exports.
'Indian and Iranian sources both confirmed to me that India and Iran are moving ahead to implement a payment system on buying oil from Iran and hope to finalise it very soon,' says Aveek Sen.
India's purchase of oil from Iran has dropped slightly in last two years and is expected to drop further given the difficulties New Delhi might have in making payments through banks due to tough sanctions imposed by US-led international community against top Iranian banks.
Italy, Greece, South Korea, Taiwan and Turkey also figure in the list released by Pompeo, who said over 20 countries have cut their oil imports from Iran, reducing purchases by more than one million barrels per day.
Crude oil prices are expected to rise this year as Iranian oil sanctions will lead to a drop in oil supply.
The crisis is not upon India immediately, as the US sanctions give a six-month breathing space for countries to act.
Swaraj expressed satisfaction over the agenda of the inaugural dialogue while giving the details of the deliberations.
India's flagship overseas firm ONGC Videsh Ltd is likely to get a 20 per cent stake in the Khusk and Hosseineieh oil fields in Iran on nomination basis.
Top government officials in New Delhi have started discussions with stakeholders ranging from shipping and container companies to export promotion councils to understand the impact of the Iran-Israel tensions and plan ahead. Inter-ministerial talks are also being lined up amid the crisis situation in West Asia, sources confirmed. While the crude flows are not directly under any threat, elevated oil prices remain a concern, according to officials.
ONGC Videsh Ltd and its partners Indian Oil Corporation and Oil India Ltd had in 2009 dropped plans to develop the Binaloud oil find in the Farsi offshore block as it found one billion barrels of reserves commercially unviable.
While not all the oil bought overseas turns up in domestic refineries, it can give companies a stake in the global crude trade.
Krishna emphasised that India takes decision taking into consideration its domestic energy requirements.
India has asked refiners that owe about $6.5 billion to Iran for oil imports to build up dollar and euro balances to avoid downward pressure on the rupee if six world powers and Tehran reach a final nuclear deal.
United States Secretary of States Hillary Clinton on Monday announced Obama administration's decision to exempt India and six other countries from US economic sanctions after they significantly reduced their imports of Iranian oil.
Afraid of US sanctions, State Bank declines payment facilitation for oil imports from Iran.
"We are exploring if Indian oil firms can open accounts in banks like Dubai-based Noor Islamic Bank so they can undertake a direct transfer of money for oil they buy from Iran," a senior government official said.
This is the first payment Indian refiners have made to Iran since February.
An Iranian delegation is expected to visit India this weekend to discuss an arrangement under which Union Bank will make payments to Halk Bank in Turkey.
Officials from India's biggest private refiner recently visited Iran to chalk out the details for resumption of trade ties with Tehran.
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