NEW DELHI — India hopes to increase crude oil imports from Iran after a deal with six Western countries gave Tehran limited respite from sanctions. The deal comes as a relief to India which maintains friendly relations with Iran and wants to boost trade and other links with Tehran.
Days after Iran reached a truce with world powers, India’s Petroleum Secretary, Vivek Rae said that India will send a delegation to Iran to discuss the mechanism for oil payments.
With Iran virtually shut out of the global banking system, India had set up a barter system with the sanctions-hit country, under which it partly paid for its crude imports in rupees. The system was not efficient.
Oil refiners said they can now start transferring the money to Iran in euros. India owes Iran more than $ 5 billion.
Petroleum Secretary Rae said Wednesday that depending on the easing of sanctions, India also may look at higher Iranian crude imports in the next fiscal year which begins in April.
In the last two years, India, which is Iran’s second biggest customer for crude oil, had slashed oil imports under pressure from the United States.
Energy analyst at Singapore-based Facts Global Energy, Praveen Kumar, said that refiners will no longer be under pressure to reduce supplies from Iran. “There is that 20 percent limit which they have year on year cut which they were meeting. I don’t think that will be enforced, I don’t think they will want them to continue cutting back on the crude from here on, because Indian refiners are actually dependent on this crude,” he explained.
India’s oil imports had fallen below the level permitted by sanctions as it became difficult to ship in the oil due to problems in extending insurance cover to tankers transporting crude from Iran. Refiners now hope to overcome this hurdle.
Indian businesses are also optimistic. Over the last year, India had tried to boost exports such as rice, automobile parts and pharmaceuticals to Iran to use up the rupees lying in Indian banks. Businessmen were looking at making investments in the country.
The head of the Federation of Indian Export Organizations, Rafique Ahmed, said this will be facilitated as banking channels open up. “Long term projects can be taken up which is difficult through rupee mechanism," he noted. "Two big cement projects are being discussed. That can be possible now, going from trade to investment.”
However, energy analysts such as Praveen Kumar warn there also could be some disadvantages for countries like India, to whom Iran was extending benefits for continuing to buy oil. “They [Iran] were working out some kind of sweetheart deals with the people who were currently continuing to buy off them, and all that will go out of the window if the import club starts to expand from here on,” Kumar stated.
Although U.S. led sanctions had restricted India’s economic relations with Tehran, their political ties remained unaffected. Political analysts say further easing sanctions would open up new avenues for cooperation between the two countries.