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US agrees to work with India on Iran oil imports ahead of sanctions: Pompeo

Highlights

India's oil imports from Iran drop sharply in August

US sanctions expected to cut Iran exports by 1.4 million b/d

India may turn to US crude to make up some volumes

Houston — The US has committed to working with India on reducing its Iranian oil imports ahead of sanctions that are scheduled to return in November, but Washington continues to aim for zeroing out Tehran's exports, Secretary of State Mike Pompeo said Thursday.

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"We will consider waivers where appropriate, but ... it is our expectation that the purchases of Iranian crude oil will go to zero from every country, or sanctions will be imposed," Pompeo said after meeting with India's foreign and defense ministers in New Delhi.

As one of Iran's top oil customers, India's post-sanctions import plans will play a major role in how much Iranian exports drop in the coming months. India's imports from Iran fell to 428,710 b/d in August, a plunge of 65% from July, according to an S&P Global Platts analysis Thursday.

Iran's exports have already started falling sharply as buyers source alternative supplies and halt loadings to allow time to complete deliveries before the sanctions take effect. Platts Analytics expects US sanctions to reduce Iran's exports of crude and condensates by 1.44 million b/d by November, compared with April levels.

Pompeo said US oil exports could be a solution for some countries as they cut ties with Iran.

"Many countries are in a place where they -- it takes a little bit of time to unwind, and we'll work with them, I am sure, to find an outcome that makes sense," he said, according to a Department of State transcript.

"And from whence they purchase the other crude oil, we're happy to see if it's American products that are able to deliver for them," Pompeo added. "I think that'd be a great outcome."

India recently signed its first term contract for US crude exports to lock in low prices.

David Goldwyn, president of Goldwyn Strategies in Washington, said he expects the Trump administration to press hard for maximum reductions.

"India has already cut back from historically high levels of imports from Iran," said Goldwyn, the State Department's top energy diplomat in 2009-2011. "I expect they will seek a graduated cutback, linked to global price levels. Given disruptions in Venezuela, Nigeria and periodically in Iraq and Libya, Secretary Pompeo will have to share what assurances he has gotten from Saudi Arabia about the future of the Vienna Alliance to persuade India to make sharp reductions in November."

India, the world's third-biggest energy consumer after the US and China, meets more than 80% of its crude requirements via imports. Iraq, Saudi Arabia and Iran are its top crude suppliers.

"The decision on Iranian imports will have to be taken independently, although the US sanctions will cut import volumes from Iran after November," said one official at the Indian oil ministry.

India's decision on crude imports from Iran will play a major role in how much exports of the Gulf nation would drop in the coming months due to the US sanctions.

Indian Foreign Minister Sushma Swaraj called the summit fruitful in promoting bilateral ties, but did not shed new light on the country's import plans after US sanctions snap back.

"Both sides decided to carry forward discussion on India's engagement on Iranian oil imports," another Indian oil ministry official said.

-- Meghan Gordon and Brian Scheid, with Ratnajyoti Dutta in New Delhi, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com