India to cut oil imports from Iran

​New Delhi: India has asked its oil firms to prepare a blueprint of alternatives sources as it considers acquiescing to US President Donald Trump's demands for ending oil imports from Iran by November 4, government and industry officials said on Thursday. 

While New Delhi says it does not recognise unilateral restrictions imposed by the US on any country and instead follows UN sanctions, oil firms have been asked to be prepared for channels to pay for Iranian oil getting blocked by November, following sanctions against the Persian Gulf nation, they said. 

Imports from Iran, which currently is India's third largest supplier of oil after Iraq and Saudi Arabia, are likely to come down and will have to be replaced with more purchases from Saudi Arabia and Kuwait, they said, adding imports from Iran after November 4 will be possible only if Iran accepts alternates like rupee payments. 

The Trump administration is piling pressure on India, China, and other buyers to end all imports of Iranian oil by a November 4 deadline as it looks to choke the Persian Gulf state's economic lifeline with sanctions over its nuclear programme. While a final view on the US asking India and China to cut Iranian oil imports has not yet been taken, the petroleum ministry has asked refiners to tread cautiously and start looking at alternatives. 

Oil Minister Dharmendra Pradhan in Mumbai said India will decide on Iranian imports keeping its best interest in mind. "Our basket (of crude imports) has become multi-country. There may be no country in the world that we have a problem getting oil from. We buy from Latin America, we buy from Brunei. When the US became an exporter, Indian companies were first to buy," he told reporters on sidelines of an industry event in Mumbai.

 India, he said, is keeping its basket of imports open and will buy oil at competitive prices. "When we decide on Iran we will inform you," he said. "India is a stable market and a mature democracy. We have a vigilant leadership. We go by our interests." 

Bringing down imports to zero, as desired by the US, may however not be feasible, officials said. Oil ministry held discussions with oil refiners on Thursdays and will follow them up with meetings with external affairs ministry next week. "Clarity will emerge in one weeks time," an official said. Replacing Iranian oil will not be a problem, but margins will be hit as Tehran offers the best commercial terms, another official said. 

High sulphur crude from the Middle-East, particularly from Saudi Arabia and Kuwait can easily replace the quantities being bought from Iran, he said.  Other sources in Latin America and the US are also some options, he added. For Saudi Arabia, which last week piloted proposal to raise OPEC output by one million barrels per day, the sanctions against Iran presents an opportunity to recover market share that shrank after last year's output curbs. 

The US, which last month pulled out of a landmark nuclear deal and said sanctions will be re-imposed on Iran within 180 days, has threatened to cut off access to the American banking system for foreign financial institutions that trade with Iran. This means India, Asia's second-largest importer after China, will have to give up the euro payment mechanism for Iranian crude imports from November when US sanctions against Iran come into force. But, it still could continue imports if Iran accepts an alternative payment or offers a longer credit period.

State Bank of India, the country's largest lender, has communicated to oil refiners that the euro payment route will be not available after November 3.