India to cut Iran oil imports in its 2014 fiscal year
21 Dec 2012 PETROLEUM BAZAAR
India plans to cut oil imports from Iran by 10% to 15% in the next fiscal
year, and more if Tehran does not lower prices to help cover higher costs
resulting from Western sanctions, a government source said. Iran’s top Asian
oil buyers—China, India, Japan and South Korea—have all reduced imports
after the US and the European Union imposed sanctions aimed at curbing
Tehran’s nuclear ambitions. The sanctions have more than halved Iran’s oil
exports this year, costing Tehran up to $5 billion a month in lost revenue.
“Next year, our imports will be 10% to 15% percent less than this year,”
said a government official with direct knowledge of the matter, who declined
to be identified because he is not authorized to speak to the media. “If
they don’t cut prices, the decline will be substantial. Indian refiners have
genuine problems with credit availability.” India, the world’s
fourth-biggest oil importer and Iran’s second-biggest client, relies on
outside supplies for 80% of its oil needs, or about 3.5 million barrels per
day (bpd). Officials at state refiners said they had yet to receive any
directive from the government to cut imports from Iran in the year beginning
April 2013, when annual contracts start.
But refiners would probably cut imports anyway because of high costs, the
officials said. The push for cheaper prices is similar to a move by Chinese
refiner Sinopec, Iran’s biggest buyer, last year. As rising international
pressures forced other buyers out of the market for Iranian oil, Sinopec
strong-armed Iran into giving it better terms for its annual oil purchases.
The US wants importing countries to make further cuts in purchases from Iran
in 2013 to avoid sanctions, a state department source said this month. South
Korea has already told the US it will cut imports by about one-fifth from a
year earlier in the six months to May, government and industry sources said
On Wednesday, Japan’s top refiner said the country’s crude oil imports from
Iran would be about 15% lower next year. There is no clear indication yet on
2013 imports by China. Daily imports into China in the first 10 months of
2012 were down 22% on the 2011 figure. For the current fiscal—and
contract—year, New Delhi had asked refiners to cut purchases from Iran by
15%. Refiners have bought more from Saudi Arabia, the top supplier, and
Iraq, pushing Iran out of the number two slot. Banks have refused to issue
short-term dollar credit, also known as buyers’ credit, for Iranian oil
imports because of the sanctions, officials at refiners said.
Indian refiners say Iranian crude has become more expensive because
sanctions force them to borrow at high domestic interest rates to finance
purchases and face continuing volatility in the rupee against the dollar.
“Economically Iranian oil is not viable. My borrowing cost has gone up,” an
official at a state-run refiner said. Starting on 6 February, US law will
prevent Iran from bringing home its oil export earnings, a measure that will
lock up a substantial amount of Tehran’s funds, US officials have said. That
could affect the continuation of India’s existing payment system with Iran,
which settles 55% in euros through Turkey’s Halkbank. The rest is settled in
rupees through a local bank.
Courtesy : LIVE MINT