India will keep buying Iranian crude despite the threat of US sanctions, oil minister says

  • U.S. sanctions targeting Iran's crude oil exports come into force from November 4, with Washington ratcheting up the pressure on governments and companies around the world to slash their Iranian oil imports to zero.
  • However, Indian Oil Minister Dharmendra Pradhan said India would continue to purchase Iranian crude in November, according to Reuters.
  • Pradhan also added the country was considering evolving a different payment system to buy Iran's oil and that it could pay using Indian rupees.
Workers perform maintenance work on Indian Oil Corp. tanks at Cochin Port in Cochin, India, on Friday, May 29, 2015.
Bloomberg | Bloomberg | Getty Images
Workers perform maintenance work on Indian Oil Corp. tanks at Cochin Port in Cochin, India, on Friday, May 29, 2015.

Two Indian oil companies have placed orders to import Iranian crude next month, Oil Minister Dharmendra Pradhan said Monday, defying a call from President Donald Trump's administration for countries to completely cut-off the Islamic republic.

U.S. sanctions targeting Iran's crude oil exports come into force from November 4, with Washington ratcheting up the pressure on governments and companies around the world to slash their Iranian oil imports to zero.

However, Oil Minister Pradhan said India would continue to purchase Iranian crude in November, according to Reuters.

Speaking at the "The Energy Forum" in New Delhi on Monday, he said the world's third-largest oil importer did not know whether it would receive a waiver from U.S. sanctions.

Pradhan also added the country was considering evolving a different payment system to buy Iran's oil and that it could pay using Indian rupees. This would signal an attempt to bypass U.S. sanctions on Iranian transactions using the dollar — the dominant currency in global oil trade.

Waivers

U.S. Secretary of State Mike Pompeo said in India last month that the White House would only consider waivers for Iran's oil buyers if they vowed to eventually bring their imports to zero.

Indian refiners imported around 10 million barrels of Iranian crude in October, although its November shipments are likely to be lower.

US Secretary of State Mike Pompeo (L) looks on as the Indian Foreign Minister Sushma Swaraj (R) present statements to the media following a meeting in New Delhi on September 6, 2018. Indraneel Chowdhury | NurPhoto | Getty Images
Indraneel Chowdhury | NurPhoto | Getty Images
US Secretary of State Mike Pompeo (L) looks on as the Indian Foreign Minister Sushma Swaraj (R) present statements to the media following a meeting in New Delhi on September 6, 2018. Indraneel Chowdhury | NurPhoto | Getty Images

State owned oil and gas company, Indian Oil, was thought to be planning on purchasing 6 million barrels of Iranian oil next month, while Mangalore Refinery and Petrochemicals were set to buy 3 million barrels, Reuters reported on Friday, citing two unidentified industry sources.

In the previous round of U.S. sanctions on Iran from 2012 to 2015, India continued to purchase Iran's oil although it was forced to dramatically reduce its purchases to protect its wider exposure to the U.S. financial system.

International benchmark Brent crude traded at around $83.38 on Monday, down nearly 1 percent, while U.S. West Texas Intermediate (WTI) stood at around $73.81, around 0.7 percent lower.

Immediate impact

Late last month, Trump urged OPEC producers to ratchet up production levels to prevent further price rises ahead of the mid-term elections in early November.

The Trump administration's push for the Middle East-dominated cartel to start pumping more oil comes as the White House prepares to impose sanctions against Iran in around four weeks' time. There are concerns a shortfall in Iran's oil production could prompt global oil supply to fall and prices to rise.

Washington is also asking buyers of Iranian oil to slash imports to zero to force Tehran to negotiate a new nuclear agreement. The U.S. has since said it could consider exemptions for countries that have already shown efforts to reduce their imports of Iranian oil.

U.S. sanctions against Tehran are widely expected to have an immediate impact on Iran's oil exports, although the estimates of exactly how much of the country's oil could disappear from November 4 vary widely.

Some energy market analysts expect around 500,000 barrels per day (bpd) to disappear once U.S. sanctions against Iran come into force, while others have warned as much as 2 million bpd could come offline over the coming months.