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Iran Oil: Experts See No Possibility of US Granting Waiver for India

The  U.S. President Donald Trump  has already made clear that America will not trade with  those who  trade with Iran post November 4 sanctions ; however, in the bilateral relations with  India there appeared to be some ray of hope that US  may waive India  from sanctions. But the US has not come out with a clear statement on its stand on India when continuing oil trade with Iran.  This silence makes the industry trackers see no possibility of waivers.

Diplomatic talks might be there between officials of both the countries; however, nothing definite is seen in results. It may be remembered here that China is experiencing the business bullying of the U.S. saying it finds it very difficult to have trade talks with US with its knife at China’s neck.

The local refiners, apprehensive of US sanctions and the aftermath, would be forced to cut imports from Iran not choosing to risk being locked out of the US financial system.

According to Vandana Hari, Founder of Vanda Insights, Singapore-based oil market analyst, “The US sanctions will impact term as well as spot purchases, as the issues around payment and insurance are the same.”

The rupee payment mechanism is one way India worked out earlier to meet the challenges of sanctions; and India is also working out other models of payment, including a better rupee payment mechanism, if possible,” according to an  official.

Iran too on its part took efforts to retain its largest buyers by offering some very effective concessions like providing Iranian ships to deliver the commodity at the Indian ports on CIF (Cost, Insurance and Freight) basis.

According to Hari, “India and Iran had found mutually-acceptable workarounds for payment as well as insurance in the previous sanctions era. I doubt there is any novel or unexplored way of beating the restrictions, so I expect them to fall back to the tried-and-tested routes. Iran may not be averse to accepting payment in rupees, and using the revenues to buy goods from India. Barter trade is another option.”

“The issue of securing a US waiver has been pushed down the road, but cannot be avoided. A waiver will be essential unless a refiner wants to risk being locked out of the US financial system. I assume the Indian refiners still buying Iranian crude are hoping the government will secure it for them,” said Hari. “What we saw with Japan and South Korea, especially South Korea that lifts a lot of condensate from Iran — the US is not considering giving any waiver — we highly doubt whether there will be any waivers given to India. This means Indian refiners will be forced to cut Iranian imports,” she added.

“Private players such as Reliance Industries Ltd and Essar Oil (now Nayara Energy) will clearly bring it down to zero. This will leave only the national oil companies like Indian Oil Corporation. We think most of them will be forced to cut sharply in the fourth quarter. We believe Indian Oil Corporation has a term deal with Iran and this might go through the next calendar year meaning next March,” she said.

Iranian crude is a substantial portion of Indian Oil Corporation’s and MRPL’s diet, so the two companies will try and hold on to it as much as they can, said Hari adding, “There are other Middle-Eastern grades capable of replacing Iranian crude, but none of those producers are offering discounts like Iran. Ultimately, the refiners will have to continue weighing the trade-off between cheaper crude and cost of jumping through hoops to buy it.”


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