BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

IF you are a Platts Market Center subscriber, to reset your password go to the�Platts Market Center to reset your password.

In this list
Oil

Analysis: India-Iran oil ties could face strain as US ratchets up pressure

Oil

OPEC/non-OPEC deliver a nail-biter in Vienna

Oil

Platts Rigs and Drilling Analytical Report (RADAR)

Agriculture | Electric Power | Natural Gas (North American) | Oil | Metals | Petrochemicals

North American Digital Commodities Summit, 2nd Annual

Oil

Crude oil futures reverse direction on bearish OECD stocks data; ICE Brent down to $60.04/b, NYMEX WTI $50.97/b

Analysis: India-Iran oil ties could face strain as US ratchets up pressure

Highlights

Refiners still uncertain of which strategy to adopt

Both oil ministries confident either will be flexible

Indian imports of Iranian oil remain above 2017 levels

London —

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

India's traditionally strong relationship with Iran will be severely tested as the South Asian country faces pressure from the US to wean itself off Iranian oil.

As US sanctions on Iran come back into force in November, India finds itself in a tricky position as it tries to keep its supply of oil sources stable without attracting the ire of US President Donald Trump's administration.

Analysts and Indian industry sources told S&P Global Platts Indian refiners and the oil ministry are still in two minds on which strategy to adopt.

"There is definitely a little more anxiety this time from the Indian side," said an oil analyst active in India's oil industry. "India really needs the economical Iranian crude but it seems there is some pressure to toe the US line this time. A final and firm decision still has not been made."

Both countries are very dependent on each other when it comes to the oil sector.

Iran is India's third-largest crude supplier after Iraq and Saudi Arabia, while India is the second biggest customer for the OPEC member's crude exports.

The India's foreign ministry always said it follows UN sanctions and not unilateral US sanctions.

But there is a growing likelihood that India will have to adopt a different strategy for the latest round of US sanctions, unlike the previous sanctions during the tenure of President Barack Obama when New Delhi continued to import crude from Iran on preferential terms.

So far the signs suggest Indian refiners, both state and private, are under pressure to reduce their reliance on Iranian crude, and their purchases of rival Saudi, Iraqi and US crudes are beginning to edge higher.

Iranian oils like Iranian Heavy crude is also considered to be more economic and price competitive than similar grades from Saudi Arabia and Iraq, trading sources said.

This makes it harder for Indian refiners to completely cut off from Iranian oil, as it faces a market where tightening supply of such grades is pushing up crude differentials.

India's oil imports in May and June have dipped to 550,000-600,000 b/d from 700,000 b/d in April, according to Platts estimates. But these figures remain slightly higher than India imported in 2017.

FLEXIBILITY

Indian oil ministry officials remain confident Iran would display flexibility in bilateral trade even after the US sanctions come into force as Tehran had extended to New Delhi during the previous US sanctions.

"We are trying to evolve a win-win bilateral trade mechanism with Iran against the backdrop of US's zero trade diktat against Tehran," said one official.

A clear picture on the issue of trade with the sanctions-hit Iran is expected to emerge after a meeting with US officials next week as regards how much the Trump administration would like India to reduce bilateral trade including oil imports by New Delhi.

Sources have said Nayara Energy, one of the biggest importers of Iranian oil in the country, has started to reduce its purchases. A representative at Nayara Energy which operates the 405,000 b/d refinery in Vadinar was unavailable for comment.

IRAN ISOLATED

Iran is increasingly finding itself isolated as the US is putting pressure on countries like India, South Korea, Japan and China to significantly cut their Iranian oil imports.

Iran is also under pressure to find a way to keep India as a key buyer.

Tehran's embassy in New Delhi has said will do its best to ensure security of oil supply to India by offering "flexible measures" to boost bilateral trade.

Earlier this year, Iran offered further freight discounts on oil sales to India after New Delhi agreed to increase volumes this year.

India's crude oil imports from Iran were expected to increase 31% on the year to 500,000 b/d in fiscal 2018-19, which begins April 1, the ministry said.

In a recent statement, Iran's embassy in New Delhi acknowledged that "Iran understands the difficulties of India in dealing with (an) unstable energy market" and it "will do its best to ensure security of oil supply to India."

India's relationship with Iran has also been sensitive due to a standoff on development of the Farzad B gas field, although both nations are working together to on building infrastructure in the key Iranian port of Chabahar.

India insists it is committed to making Iran's Chabahar port operational by 2019 to aid trade flows with Afghanistan and Central Asia.

But progress has been slow and Iran wants Indian investment to grow faster.

--Eklavya Gupte, eklavya.gupte@spglobal.com, with Ratnajyoti Dutta, newsdesk@spglobal.com

--Edited by Jeremy Lovell, newsdesk@spglobal.com