After ending all imports of oil from Iran last month due to increasing U.S. sanctions, India may not restart buying Iranian oil in the near future, the prominent Indian news outlet ThePrint disclosed. “India has no plans to resume oil purchases from Iran “anytime soon” even as New Delhi has been able to settle with Washington the issue of obtaining pending shipments from Tehran,” ThePrint reported citing a top Indian official.
India, Iran’s second-largest buyer after China, imported nearly 23.5 million tons of crude oil from the country in financial year 2018-19, contributing more than 10 percent of its demand.
Tehran has long been a preferred destination for Indian oil companies. “Iranian oil is more lucrative for Indian refiners, as Iran provides 90 days of credit purchases along with cheaper freight due to proximity,” the India daily Economic Times explained recently.
Faced with ever-tightening U.S. sanctions, New Delhi was now looking for other suppliers. “We have enough reserves for the next one year. In the meantime, we expect to sign contracts with other partners who would replace Iran,” the official told The Print. In short run, India is looking at Saudi Arabia, Iraq, Kuwait and the United States to make up for the shortfall due to the absences of Iranian imports, Indian media reports indicate.
The disclosure comes just days after India’s newly appointed interior minister, Amit Shah, chaired an inter-ministerial meeting to review country’s energy security amid tightening U.S. sanctions on Tehran. “The meeting held in the wake of Indian oil companies looking for alternative sources of crude oil as the country has stopped oil imports from Iran following US sanctions,” the New Delhi-based newspaper Financial Express reported June 4.
With India’s long-term energy needs in mind, leading state-owned companies had acquired stakes in gas fields in Mozambique, according to media reports. The “meeting revolved around the rich investments made by the State-owned oil and gas firms in Mozambique,” Indian newspaper The Hindu said citing government sources.
India is the world’s third-biggest oil consumer, with most of its energy needs being met through imports. The country brings in almost 80 percent of its oil requirements. The domestic economy has been hit hard by rising crude oil prices. New Delhi shelled out $111.9 billion on oil imports in the financial year 2018-19, compared with $87.8 billion in the previous year, according to Indian Oil Ministry’s Petroleum Planning and Analysis Cell (PPAC).
If India requires cheap oil to remain competitive in the world market, it also needs the United States to check China’s growing geopolitical ambitions in the region. Flanked by hostile neighbors—to the east by the Communist China and to the West by Pakistan—New Delhi’s security concerns often outweigh short-term economic considerations.
In the summer of 2017, India’s decades-old border dispute with China turned into a military standoff along its shared 2,200 mile-long Himalayan border, bringing the two Asian nuclear powers closer to war.
With its newfound economic strength, the Chinese People’s Liberation Army is conducting joint military exercises with Pakistan. Chinese Navy’s aggressive patrols in the Indian Ocean have been too close to comfort for New Delhi. India is equally alarmed by the $50 billion China-Pakistan Economic Corridor, which gives Beijing access to the deep-sea port on the Arabian Sea.
Military planners in New Delhi are equally concerned about Beijing’s so-called string-of-pearls strategy aimed at gaining control of key ports stretching from the Indian Ocean to the Persian Gulf, which effectively gives Chinese Navy the ability to impose a naval embargo against India in case of an armed conflict.
India’s Prime Minister Narendra Modi’s government is mindful of Beijing’s growing geopolitical ambitions. He has sought stronger diplomatic and strategic ties with the United States, Japan and other Far East Asian countries in order to counter China’s growing military and economic clout. These security concerns largely underlie New Delhi’s willingness to comply with U.S. sanctions on Iran despite considerable financial cost to the exchequer.
