India is exploring ways to increase crude oil supplies from Iran without attracting US sanctions.
The current waiver granted to India by the US is set to expire in December and any further extension is largely dependent on how far business with Iran has been contained.
A senior Government official told
At present, the legal tenability of buying more Iranian crude oil during the fiscal without affecting other commercial relations (US) is being examined by the External Affairs Ministry’s legal & tender department. The US could allow higher imports this year since there was sharp drop in crude sourcing from Iran last year, the official said.
Imports from Iran were brought down by more than 25 per cent last year, while the US had only asked for a gradual reduction. Last year total imports from Iran were at 13.14 million tonne.
“It all depends on how the term ‘gradual reduction’ is interpreted. The other countries that had been granted waiver by the US have reduced their annual purchase by about 15 per cent,” the official said.
The architects of the US sanctions legislation, Democratic Senator Robert Menendez and Republican Senator Mark Kirk, had proposed that oil importers should reduce their purchases by 18 per cent or more every year to qualify for further exemptions.
In 2011, the US imposed sanctions against Iran for suspected nuclear activities. It meant that those countries which continue to do business including purchase of oil with Iran will not be extended support from the US financial system.
1st round waiver
Countries dependent on Iranian oil such as India, China and Japan, were given the first round of waiver in June last year on the condition that they gradually reduce their purchases from the Gulf country. This was further extended till end of this year.
While the Government is exploring this aspect, domestic oil refiners feel that India would need to resolve the insurance issue to enable them to purchase more from Iran. “Supply is not an issue, but it is lack of insurance cover which is affecting imports from Iran,” said one of the domestic refiners.
If the Government wants supplies to increase then it has to resolve the insurance issue, the refiner added. Western sanctions do not prevent Indian insurance companies from providing cover, but they depend on reinsurance from the Western companies, because of the high risks involved.
The sanctions discourage global re-insurers from taking on the risk.
To resolve this, the Government is putting in place an insurance fund. The Fund is yet to become operational.