Submitting to pressure from the United States, two of India’s largest crude importers have agreed to reduce their dependence on oil from Iran by at least 15 percent this fiscal year, according to a report in the Wall Street Journal.
Up until now, India had adamantly opposed sanctions against Iran – however, it seems western pressure is paying some dividends. The petroleum ministry in New Delhi has reportedly instructed the state-owned Mangalore Refinery & Petrochemicals Ltd. and privately held Essar Oil Ltd. to scale back their Iranian oil imports.
India reportedly purchases 12 percent of its overall crude oil needs from Iran.
The U.S. and European Union have applied extraordinary economic sanctions on Iran in an effort to force the Islamic Republic into relinquishing its nuclear program. The EU will ban all imports from Iran, effective July 1.
U.S. financial sanctions on Iran’s central bank have also made it more difficult for India (and other countries) to easily buy Iranian crude oil. Such sanctions have even forced Iran to accept Indian rupees as payment for about half of the oil it sells to India.
There's been an attempt to diversify our purchases. Things have become very complicated, India’s Foreign Secretary Ranjan Mathai recently said, according to the Journal.
The sanctions have pushed Iranian oil output to their lowest levels in 20 years, likely impacted by reduced purchases from countries like Japan, South Korea and even Iran’s erstwhile ally, China.
JBC Energy GmbH of Vienna, Austria revealed Wednesday that Iranian oil production slipped to 3.2 million barrels-per-day in April -- the lowest such level since 1990, when Iran was struggling to recover from its war against Iraq.
The latest development comes one week ahead of an official visit to India by U.S. Secretary of State Hillary Clinton, where the subject of Iran will surely come up.
However, according to Indian government data, imports oil from have been declining over the long term anyway.
India imported about 14 million tons of Iranian crude for the fiscal year ended March 31, 2012 -- a 20 percent plunge from the previous year.
Two years ago, Indian had bought as much as 21.2 million tons from Iran.
Still, an article in the Russia & India Report refutes the notion that India will genuinely cut back on buying Iranian oil, noting that no senior New Delhi government official has explicitly made such a declaration.
The author, M K Bhadrakumar, also is skeptical of the unnamed sources that the Journal cited in its report.
“Maybe the Indian government policy is to dissimulate so that, the Americans are thrown off the trail,” he wrote.
Moreover, complicating matters is that Iran is sending a large trade delegation to India, while India recently agreed to provide limited insurance cover to local vessels that carry Iranian crude.
Meanwhile, Iran will return to the negotiating table with officials from six world powers in Baghdad, Iraq later this month to discuss a compromise for Tehran’s nuclear program.