Chennai Petroleum cancels Iran oil imports

Lloyd Doyle
September 20, 2018

India may revert to paying Iran in rupees for the oil it buys from its third largest supplier as U.S. sanctions will from November 4 block use of USA dollars to settle such trades, a top official said Thursday.

The remaining 45 per cent payment was remitted in rupees in accounts Iranian oil companies had with the UCO Bank.

In May, the Trump administration had pulled out of the Iran nuclear deal and brought back economic sanctions against Tehran. The US' sanctions on import of Iranian petroleum products will be effective from November 4.

Many refiners in Japan, the world's fourth-biggest oil consumer, say they are also resigned to completely halting imports from one of their historically important suppliers, unlike during a previous round of sanctions when they only reduced imports from Iran. India is the second-largest buyer of Iranian crude oil, sourcing more than 10% of its overall oil imports from the Middle Eastern country.

The official said refiners have booked oil cargoes from Iran for the current month as well as for October. Some sanctions took effect on August 6, while those affecting the oil and banking sectors will start from November 4.

The official said Iran is open to accepting rupee payment for oil and may use the money to pay for equipments and food items it buys from India.

India risks being cut off from the USA financial system if it continues to maintain financial transactions with Iran without a waiver. UCO Bank has handled similar transactions in the past, hence it will be the preferred bank.

The rupee-rial arrangement was used to buy oil from Iran before sanctions were lifted against it three years ago. These channels would get blocked from November.

State-owned refiner Hindustan Petroleum Corp has already halted purchases due to insurance problems, while Bharat Petroleum Corp boosted Iranian purchases earlier this year and expects to sharply cut Iranian flows once the sanctions take effect.

"It is my view that each firm is taking the same stance and temporarily suspending (the loading) and watching the situation carefully", Takashi Tsukioka, the President of the Petroleum Association of Japan (PAJ), said when asked if Japanese refiners plan to halt Iranian loadings from October. India is yet to take a call on complying with the United States sanctions on Iran.

Iran is India's third largest oil supplier after Iraq and Saudi Arabia. India, Iran's top oil client after China, is still seeking some exemptions to the sanctions from the USA though some refiners have already curtailed purchases because of insurance issues tied to the sanctions.

Under Cost, Insurance and Freight (CIF) mode of shipping, the seller assumes the responsibility of transportation and insurance.

Other reports by Iphone Fresh

Discuss This Article