Two weeks after China – the top importer of Iranian crude oil – defied the White House, disclosing that it would continue importing Iranian oil ignoring US sanctions on Tehran, India, the second biggest buyer of Iranian oil exports, has given permission to its state refiners to import Iranian oil using a similar scheme as China in which Tehran would arrange tankers and insurance after firms including the country’s top shipper Shipping Corp of India halted voyages to Iran due to U.S. sanctions.
According to Reuters, New Delhi’s attempt to keep Iranian oil flowing mirrors a step by China, where buyers are shifting nearly all their Iranian oil imports to vessels owned by National Iranian Tanker Co (NITC). China previously said that it would not stop buying Iranian oil despite U.S. efforts to bring the Iranian exports down to ‘zero.’ But Beijing is also said to have agreed not to increase its oil purchases from Iran.
The decisions by Iran’s two top crude oil customers confirm that the Islamic Republic will not be fully cut off from global oil markets from November, when U.S. sanctions against Tehran’s petroleum sector are due to start.
“We have the same situation (as most Western shippers) because there is no cover, so we cannot go (to Iran),” an SCI official told Reuters.
New Delhi turned to the NITC fleet after most insurers and reinsurers had begun winding down services for Iran, wanting to avoid falling foul of the sanctions given their large exposure to the United States. As a reminder, President Trump ordered the reimposition of economic curbs after withdrawing the United States from a 2015 nuclear deal between Iran and six world powers. No one trading with Iran will do business with America, he said although that threat appears to not be too concerning to either China or India.
SCI had a contract until August to import Iranian oil for Mangalore Refinery and Petrochemicals Ltd (MRPL), two sources familiar with the matter said.
Eurotankers, which had a deal with MRPL to import two Iranian oil cargoes every month, has also said it cannot undertake Iranian voyages from September, the sources said.
“The shipping ministry has given refiners permission to buy Iranian oil on a CIF (cost, insurance and freight) basis,” a government source told Reuters. Under the CIF arrangement, Iran will provide shipping and insurance, enabling Indian refiners to continue purchases of the country’s oil despite the non-availability of cover from Western insurers due to the restrictions imposed by Washington.
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The move will benefit Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and MRPL, which plan to lift Iranian cargoes during the rest of the fiscal year ending on March 31. India wants to continue buying oil from OPEC member Iran as Tehran is offering almost free shipping and an extended credit period.
With the Indian decision, it is possible that virtually all of Iran’s output could be captured by just China and India if Tehran’s other “pro-US” clients decide to comply with the US sanctions. Indian state refiners, which drove India’s July imports of Iranian oil to a record 768,000 barrels per day, had planned to nearly double oil imports from Iran in 2018/19.
Reuters notes that unlike their private peers, India’s state-run refiners need government permission to import oil on a delivered, or CIF, basis. Federal policy requires them to favor Indian insurers and shippers by buying only on a free on board (FOB) basis. However, the permission for CIF purchases applies only to existing annual contracts with Iran, the government source said.
India will finalize its strategy on crude purchases from Tehran after a meeting with top U.S. officials this week, a senior government official told Reuters last week. With it now public knowledge that India will defy the White House on Iran oil purchases, it remains to be seen what, if any, retaliation the Trump administration will threaten against India should it proceed as planned.
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