India banks on US waiver for Iran oil as domestic firms cut imports significantly

The country's public sector oil companies have placed orders for buying crude from Iran in November even though the US sanctions will kick in during the month as India hopes to get a waiver from the Donald Trump administration. A senior official said the waiver is expected on the ground that India has significantly reduced its oil imports from Iran before the Nov 4 deadline for US sanctions comes into effect. Washington said on Friday it was considering waivers for nations that were reducing imports of Iranian oil. The announcement is the first indication that Washington is considering such waivers.

Petroleum Minister Dharmendra Pradhan told journalists here on Monday that New Delhi was discussing the issue of a waiver "with all the authorities concerned". "We have to fulfill all our domestic requirements," Pradhan said, confirming the plan to buy some Iranian crude after U.S. sanctions come into effect. Indian Oil Corporation and HPCL-run Mangalore Refineries and Petrochemicals Ltd are the two companies that have signed deals for buying Iranian oil. India, Iran's second biggest oil buyers after China, has officially stated it recognizes only UN sanctions.

However, New Delhi requires a waiver in order to ensure the wider exposure of the country's foreign trade to the U.S. financial system is not adversely impacted. India oil companies have been reducing oil imports from Iran since September. The country's oil companies will lift 9 million barrels of Iranian oil in November, equivalent to about 300,0000 barrels per day (bpd), compared to an average of about 658,000 bpd from April to August, according to data available with Reuters.

A senior official said, the country is trying to balance its relationship with the U.S. and Iran, at the same time keeping its energy and security interests in mind. He said Indian refiners had started importing oil from the United States but purchases infrastructure. "As U.S. infrastructure improves, India has a potential to lift more," he said. U.S. Secretary of State Mike Pompeo said in New Delhi that the U.S. administration acknowledged some buyers of Iranian oil would take a "little bit of time" to unwind their trade with Iran.

"We expect the global leadership to acknowledge India's need for Iran's oil," Pradhan said, adding that he wanted major oil producers like Saudi Arabia to raise production. Pradhan said he had spoken to Saudi Oil Minister Khalid al-Falih two day earlier about the June decision by OPEC and major oil producers to add 1 million bpd to the oil market. "Oil should not only be priced from a producers' point of view. Consumers interest should also be taken care of," he remarked. Indian Oil chairman Sanjiv Singh said some Indian refiners recently made payments for Iranian oil in rupees, and could use the same mechanism in future to settle trade with Tehran if no other alternatives were found.

Iran can use the rupee to settle its imports of pharmaceuticals and other goods from India. Even without sanctions, Iran had been accepting rupee payments. So let us see how it evolves,'' he observed. Sources said UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the US financial system. UCO Bank had in the previous round of sanctions handled rupee payments. Currently, India pays Iran in euros using European banking channels. These channels would get blocked from November.