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.
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)
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
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.
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.”