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India will continue importing Iran oil in spite of US sanctions

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India is discussing with European members to find ways in order to convince the US to remove its sanctions on Iran, as it will affect negatively on the Indian economy. India imports its 80 percent of the crude oil from Iran.

The US mounts pressure on sanctioning to Iranians and India is, therefore, searching for ways to maintain its ties with Iran. One of the sources said that Iran’s major customers for crude oil are countries like India and China, who are seeking ways to go around US sanctions and keep Iran oil lines open for them. India and China have also indicated their defiance request to US sanction request.

As per our sources, India has an agreement with Iran for oil supplies and importing oil from the Persian Gulf is accordingly minimal than importing from the US. Iran also gives a longer credit repayment period than the US. Iran has become the third largest oil supplier in India and imports more than 80 percent energy needs. When calculating the costs they are lucrative in the long run.

On the other hand, India is exploring alternative supplies as Iran’s cost of oil and shipping are likely to rise. Indian rupee is weak which will weigh to its cost too. This will ultimately lead India to face the economic crisis in the future.

Our sources have reported that India will cut off its crude oil imports from Iran to half of the present supply. This will be done in order to secure the waiver from the US to carry on with shipments. Besides this, India will also have to seek alternatives that are more expensive, in the absence of waivers. If the sanctions result in a drop of Iran’s export, then there is a case of oil price to increase globally.

On 8th Aug, reports from Kotak Institutional Equities said that India’s position would worsen if the crude oil prices were increased more than $80/barrel. A $10/barrel increase in oil price can result in 50 basis point impacting current account deficit, resulting in inflation. One basis point is one-hundredth of a percentage point.

 

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