Iranian crude in global market is extremely important for sustaining a balance in oil trade, believes Sanjiv Singh, Chairman, Indian Oil Corporation Ltd.

India is one of the largest consumers of crude oil and Iran has been one of the key suppliers. On November 5, the US announced exempting eight countries, including India, from the sanctions for importing oil from Iran. This exemption is for six months and Washington will review the 180-day waiver it granted to India and seven others after April 2019.

Asked about what IndianOil’s strategy will be once the six-months period is over, Singh told BusinessLine “Let us see, we have six months.”

A concern has been the payment mechanism despite the waiver. A trader, who didn’t wished to be identified, said that rupee payment mechanism serves everyone’s purpose.

“From India’s point of view there is not much spend on foreign exchange for imports from Iran; From Iran’s perspective they continue to get regular payment that can be used against whatever imports they do from India; and from the US point of view also it is not worrisome because payment is being done in a currency which Iran cannot use for anything else,” he explained.

India’s role

On the impact of sanctions on oil supply in the market, he said, “Even before waiver was given, the market had already factored in shortfall from Iran. So the market was prepared. In fact, India has played its card very well — while it has not buckled under the US sanctions, it has continued to get reasonable supply from Iran.”

By continuing to buy from Iran, India has also been able to sustain a balance in the market, the trader said.

Meanwhile, senior officials in the government said India is likely to continue purchasing oil from Iran in 2019, although at lower levels than the previous year, and were hopeful that it will not lead to acrimony with the US. New Delhi is expecting a positive result when the US reviews the waiver, according to government officials.

“India had extensive discussions with the US on the country’s oil economy and how getting reliable and cheap supply was essential for economic growth. We clearly communicated that till we have access to alternatives, we cannot bring down our imports from Iran sharply,” an official said.

Interestingly, the US has announced no guidelines or details on how much the countries that have been given waivers will be able to import. This is where India’s optimism comes from.

Cut down imports

The official pointed out that a number of private companies had already cut down their imports of oil from Iran considerably.

“This will be taken into account by the US when it does its review. We understand that other countries too have cut down on their imports. When Washington does an overall review of imports from Iran by the countries that had been given waivers, there would be enough reasons for it to give an extension,” the official said.

India and Iran, however, have yet to resolve the way in which payments have to made for oil. New Delhi is keen that the rupee payment mechanism, used to partly pay for oil from Iran last time there were sanctions against the country, will be used this time as well. But alternative mechanisms, in which payments are made through currencies other than dollar, are also being examined.