NEW DELHI: India may face problems in making payments for crude oil it buys from Iran because of recent moves by the US to curb Tehran's nuclear programme, a top government official said on Friday.
India currently pays Iran about USD 1 billion every month through Turkey for the 370,000 barrels per day of crude oil it buys from the world's fourth-largest oil producer. "There are chances that Turkey may come under pressure after a fresh round of US sanctions imposed on Iran," the official, who wished not to be named, said.
Routing payments through Russia was discussed during the visit of Prime Minister Manmohan Singh to Moscow last month. But Russia is not keen due to "complexities" involved.
US President Barack Obama signed a Bill into law late last month empowering US authorities to impose penalties on foreign banks dealing with the Central Bank of Iran to settle oil import payments.
National Security Advisor Shivshankar Menon yesterday chaired a meeting of officials from the Ministries of Finance, Petroleum and External Affairs and the Reserve Bank of India after indications from Turkey's state-run Halkbank that it would have to stop settling payments on behalf of Indian companies.
The official said a multi-disciplinary team would visit Tehran later this month to discuss the issue of uninterrupted supply. New Delhi, however, sees no supply disruptions unless the Strait of Hormuz is closed.
Iran has threatened to block oil deliveries through the Strait of Hormuz if sanctions are imposed on the country's oil industry over its nuclear activities. The US Energy Information Administration estimates that the strait carries about 20 per cent of all oil traded worldwide.
India gets about three-quarters of its crude needs through imports and Iran is its second-largest supplier after Saudi Arabia. The European Union has also agreed in-principle to ban imports of Iranian crude oil to the EU.
The official said annual crude supplies of 94.82 million tonnes from six Middle East nations could be hampered if the Strait of Hormuz is closed. Six Gulf nations, including Saudi Arabia and Iran, supply 58 per cent of India's total annual consumption of 163.59 million tons of crude.
The closure may also hinder the 7.5 million tonnes of liquefied natural gas that Qatar ships through tankers each year to India, he said.
India, however, sees oil prices rising if the tension between Iran and the West continues. "If that happens, it will be difficult for us to manage," he said, pointing to Rs 135,000 crore revenue loss that state-owned oil firms estimate at current oil prices on selling diesel, domestic LPG and kerosene below the imported cost. "We are finding it difficult to meet even these under-recoveries (revenue loss)," the official said.
The new sanctions against Iran come with a wide range of exemptions and a grace period of six months. The EU is also debating the number of months it would wait to implement the sanctions and if long-term supply deals should be allowed to be completed.
New sanctions on Iran pose problem for India's oil payments - The Economic Times