Chennai Petroleum cancels Iran oil imports

Mae Love
September 22, 2018

India, Iran's top oil client after China, is still seeking some exemptions to the sanctions from the US though some refiners have already curtailed purchases because of insurance issues tied to the sanctions.

Without a waiver, an oil trade or financial transaction with Iran risks cutting India off the USA financial system.

India is likely to resist the American pressure on complying with the reimposed Iranian sanctions as it has been a traditional policy of New Delhi to enforce only UNSC-authorised sanctions, a Congressional report has told lawmakers.

Although oil sanctions come into effect on 4 November, US threats have pushed European and Asian buyers (especially in India and Japan) to cut their purchases.

In the Bush administration and during the Obama administration until the 2015 nuclear deal with Iran, some USA allies, including Japan, South Korea and India, were given waivers from sanctions related to Iranian oil imports.

Background: The United States has pressured countries to end all imports of Iranian oil and increased sanctions against the Islamic republic after U.S. President Donald Trump chose to pull his country out of the Iran nuclear deal.

United States sanctions against Iran come into effect from November 4 and will block banking channels. It was India's second biggest supplier of crude oil after Saudi Arabia till 2010-11. India has said that the implementation of Joint Comprehensive Plan of Action (JCPOA) sanctions relief in January 2016 paved the way for work to begin in earnest on the Chabahar project.

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"India has long sought to develop Iran's Chabahar port, which would give India direct access to Afghanistan and Central Asia without relying on transit routes through Pakistan", the report said.

The sources said India has selected UCO Bank and IDBI Bank for facilitating payment to Iran.

India wants to secure a waiver for imports from the U.S., which is why it has significantly reduced its oil purchase from Iran after the latter's ties with the United States soured.

UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the USA financial system.

The rupee-rial arrangement was used to purchase oil from Iran before sanctions were lifted against it three years ago.

India is looking to win waivers, and its Iranian imports this month and next are expected to be 45 percent lower than the average between April and August-360,000 bpd-370,000 bpd for September/October compared to 658,000 bpd for April-August, according to data from trade sources obtained by Reuters.

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