Will US help allies to replace Iranian oil sources?

Roman Schwartz
September 23, 2018

India, Iran's top oil client after China, is still seeking some exemptions to the sanctions from the USA though some refiners have already curtailed purchases because of insurance issues tied to the sanctions. Iranian oil exports have dropped ahead of sanctions as several countries have begun to curtail their purchase from the Middle-East producer.

Under the process, India used to pay in euros to clear 55% of its dues through Halk bank based in Ankara.

Two industry sources also told Reuters Thursday that India will settle payments for Iranian oil using rupees through local banks starting in November as the sanctions will make it hard to settle trades through European banks.

India is in touch with both Iran and the U.S. on the complex issue.

France and Germany, two European countries which are still part of the 2015 nuclear deal with Iran are working out a payment mechanism that will not include the US dollar in financial transactions with Tehran. "Of course, the problem of unilateral sanctions imposed by U.S. on Iran should be taken into consideration".

UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the United States financial system.

Earlier, India was looking at the possibility of falling back on the rupee-rial arrangement for importing oil from Iran in the wake of USA sanctions.

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"India's position has generally been that it will only enforce sanctions authorised by UN Security Council resolutions, rendering it likely that India will resist USA efforts to compel it to comply with reimposed United States sanctions such as those that mandate cuts in oil purchases from Iran", the independent Congressional Research Service (CRS) said in its latest report on Iran.

Earlier, India was looking at the likelihood of falling back on the rupee-rial arrangement for importing oil from Iran in the wake of USA sanctions. Oil refiners such as state-owned Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals (MRPL) could use UCO Bank or IDBI Bank to route oil payments to Iran, the official added.

South Korea did not import any Iranian oil in August, compared to 194,000 bpd in imports from Iran in July, according to tanker-tracking and shipping data compiled by Bloomberg.

The Union government on Friday chose to settle payments for Iranian oil in rupee through the Mumbai branch of an Iranian bank.

In today's meeting - attended by Jaitley, Foreign Minister Sushma Swaraj and Road Minister Nitin Gadkari - it was made a decision to start importing crude oil from the Chabahar port in Iran.

But the actual volumes imported may be far less as companies like Reliance Industries have totally stopped buying oil from Iran and others too are scaling it down in hope of winning a sanction waiver from the US.

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