Despite the US pressuring India to cease oil imports from sanctions-hit Iran, the government is going ahead on negotiating greater oil purchases from the West Asian nation, along with Venezuela and Russia.
However, this will be done with an aim to create a rupee-based trading mechanism with these nations, so as to reduce the exposure of the US dollar to India’s largest import category. At an inter-ministerial meeting last week, Commerce and Industry Minister Suresh Prabhu asked the commerce, revenue, and petroleum departments to work on the possibility of a rupee trade mechanism with all these nations, according to senior source in the know.
Petroleum Minister Dharmendra Pradhan on Monday said the two Indian oil refiners have contracted Iranian crude oil for November. India is hoping to get a waiver from the US as the sanctions are set to be in place on November 4. “Two oil companies of ours have made nominations to purchase Iranian oil in November. We do not know if we will get a waiver (from US sanctions),” Pradhan said at The Energy Forum.
“We will be guided by our national interest,” Pradhan added. He said India has requested Saudi Arabia to increase the supply of crude. Meanwhile, Indian Oil Corporation Chairman Sanjiv Singh said India is considering Iran crude oil payments in rupee terms. At present, Iran is the third-largest supplier of crude oil to India. The rupee payment mechanism has been suggested as the best possible way to cut India’s dollar exposure as well as shore up the value of the rupee, which has continued to plummet.
The Donald Trump Administration has cancelled the nuclear deal with Tehran and announced the re-imposition of several sanctions on the Iranian regime that will target the nation’s crude oil exports starting November 4. Over the past two months, Washington DC has continued to put pressure on governments and companies worldwide to cut their imports from the nation.
As a result, the US has made the issue a part of its current trade negotiations with New Delhi. “Senior US officials visiting India have suggested they may be willing to give India a waiver on America’s tariff hikes on aluminium and steel imports, provided India commits to significantly change its sourcing pattern with regards to petroleum,” a senior trade department official. India is yet to respond to this, he added.
The previous United Progressive Alliance government had also been able to bypass international sanctions led by the US after deciding to use the euro for paying Iranian producers. But India will not have access to the European currency this time around as leading European Union nations have also supported Trump’s call for sanctions.
On the other hand, senior industry insiders pointed out that India remains among the few countries paying Venezuela for oil imports through the US dollar. However, the government believes the South American nation — facing an economic crisis rife with hyperinflation and food shortages — will not part with a significant source of US dollars. “Suggestions to use bitcoins for oil payments to Venezuela have been struck down as we did not find it feasible to buy and sell an online currency not governed by sovereign laws,” a senior revenue department official said.
As for Russia, New Delhi is open to a barter arrangement for the two largest imports —diamonds and oil — apart from a rupee mechanism. Global oil prices have dropped from the highest levels they reached in the early part of the year, as investors focused on rising output from other producers, such as top exporter Saudi Arabia, to compensate for lower Iranian supplies. Saudi Arabia said last week it plans to raise production in November from October output of 10.7 million barrels per day, indicating Riyadh will be increasing its supply to the highest-ever level.