India buys 370,000 barrels per day of crude oil from the world’s fourth-largest oil producer,Iran with a cost of about USD 1 billion every month through Turkey.However, India may face problems in making payments for crude oil it buys from Iran because of recent moves by the US to curb Tehran’s nuclear programme.Routing payments through Russia was discussed during the visit of Prime Minister Manmohan Singh to Moscow last month. But Russia is not keen due to “complexities” involved.
US President Barack Obama signed a Bill into law late last month empowering US authorities to impose penalties on foreign banks dealing with the Central Bank of Iran to settle oil import payments.
Iran has threatened to block oil deliveries through the Strait of Hormuz if sanctions are imposed on the country’s oil industry over its nuclear activities. The US Energy Information Administration estimates that the strait carries about 20 per cent of all oil traded worldwide.India gets about three-quarters of its crude needs through imports and Iran is its second-largest supplier after Saudi Arabia. The European Union has also agreed in-principle to ban imports of Iranian crude oil to the EU.
Six Gulf nations, including Saudi Arabia and Iran, supply 58 per cent of India’s total annual consumption of 163.59 million tons of crude. The closure by Iran, may also hinder the 7.5 million tonnes of liquefied natural gas that Qatar ships through tankers each year to India.
However,The Indian Government is optimistic that there would be no impediments to importing Iranian oil despite a new wave of sanctions imposed by the West.”As long as there are no sanctions on oil as such, other problems can be managed .There are some practical problems in making payments but we have managed to surmount those problems”Oil Minister S.Jaipal Reddy commented.
The U.S., Britain and Canada announced new measures against Iran’s energy and financial sectors last month and France proposed “unprecedented” new sanctions, including freezing the assets of its central bank and suspending purchases of its oil.Mr.Reddy declined to comment on whether India would buy more Iranian oil if the European Union bans imports, or whether India was in talks with Saudi Arabia about fall back supplies if Iran crude stops coming, saying both were “hypothetical” situations.
