US sanctions on Iran: Can’t ensure cheap oil supply to India, says US commerce secy

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Updated: May 7, 2019 7:13:25 AM

The US sanctions against Iran have barred India and other Asian buyers from importing oil from Tehran, New Delhi's third-largest supplier in FY19.

crude oil price, crude oil, crude oil price today, crude oil price chart, US sanctions on Iran, us, iran, oil exports, oil imports, news, india, market news, financial express, financial express newspaper, financial express epaper, financial express today, financial express epaper todayUS sanctions on Iran: Can’t ensure cheaper oil supply to India, says US Commerce secretary (Representative Image)

US commerce secretary Wilbur Ross, who is on a visit to New Delhi, on Monday said that the Trump administration can’t ensure the sale of American oil to India at cheaper rates as the prices are controlled by private companies. The US sanctions against Iran have barred India and other Asian buyers from importing oil from Tehran, New Delhi’s third-largest supplier in FY19.

Asked if the US would supply at lower rates to make up for loss to New Delhi, Ross said: “Oil is owned by private people, so the government cannot force people to make concessionary prices.”  Oil imports from Iran suit India more as supplies from Tehran typically land up here in around a week, while those from the US and South American nations take as many as 30-45 days. This also adds to the shipping and other logistics costs, inflating the import bill.

Making use of the leniency accorded by the US since it re-imposed sanctions on oil imports from Iran in November last year, Indian refiners managed to import 22.8 million tonne from the Persian Gulf nation in FY19, against 22.6 million tonne in FY18. As much as 80% of FY19 imports from Iran took place by October-end, before imports were restricted to 300,000 barrels per day.

However, the toughening of the US stance now (removal of the part waiver took effect from May 2) will have an adverse impact on India’s crude import bill as apart from an overall price spike, New Delhi may have to tap costlier options to source the crude varieties that best suit its main refineries. Importantly, oil exports from the US to India shot up a staggering 328% to 6 million tonne in FY19, against 1.4 million tonne in FY18. In terms of rankings, the US entered the top 10 oil exporting nations list to India at 9th position, jumping nine spots from its 18th rank in FY18.

Imports from the US are likely to go up in the current financial year as Indian Oil has signed an annual contract to buy 60,000 barrels of US crude oil per day during FY20. Earlier, Indian refiners mostly relied on spot buys for US oil. With Iran crude oil tap going dry for India, other refiners including MRPL — which sources 25% of its crude oil requirement from Iran — will also be exploring oil imports from the US.

India’s total crude oil imports for FY19 was marginally down to 209.4 million tonne, compared with 218.1 million tonne in FY18, according to official data. At the same time, India produced 34.2 million tonne of crude oil in FY19, down from 35.7 million tonne in the previous year.

Despite India’s oil imports inching down, the cost of oil import went up from $87.4 billion in FY18 to $107 billion in FY19 as average annual crude oil price went up from $57.85 per barrel to $70.86 per barrel.

US President Donald Trump reimposed sanctions on Iran last year by revoking the deal between the Persian Gulf nation and other European nations, apart from the US, signed in 2015. While some sanctions came into effect immediately on August 6, 2018, oil-related sanctions came into force from November 2. However, eight nations, including India, were given waiver till May 2 to import restricted quantity of crude oil from Iran. However, Trump recently declared that the country will not extend the waiver for existing importers of Iranian oil.

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