India will be looking at the economics—and not the politics—of importing U.S. crude oil, and Indian imports of American oil should not be seen as a replacement for Iranian barrels, India’s BusinessLine reports, quoting a senior Indian government official.
Last week, U.S. Secretary of State Mike Pompeo—who met with top Indian officials to discuss Iranian oil, among other things—said that the U.S. would consider waivers “where appropriate”, but reiterated that the United States expects to have Iranian oil exports to ‘zero.’
“We have told the Indians consistently, as we have told every nation, that on November 4th the sanctions with respect to Iranian crude oil will be enforced, and that we will consider waivers where appropriate, but that it is our expectation that the purchases of Iranian crude oil will go to zero from every country, or sanctions will be imposed,” Secretary Pompeo said, noting that many countries would need “a little bit of time to unwind.”
India is Iran’s second-largest single oil customer and is expected to cut back on Iranian oil purchases, but is unlikely to cut off completely the cheap Iranian oil that is suitable for its refineries.
Over the past few months, rising oil prices and the weakening Indian currency have already created a perfect storm for India, where oil demand growth has been surging, but the higher oil prices are increasing the country’s spending on crude oil imports, which account for 80 percent of Indian oil consumption.
Speaking to BusinessLine, the senior Indian government official confirmed that the U.S-India summit last week discussed India scaling up American oil imports as part of U.S. measures to cut its trade deficit.
Secretary of State Pompeo: US / India to work together to Halt Iran oil Imports ahead of Sanctions
“But we are clear that these are commercial decisions — dependent on how competitively oil is priced and on the requirements of our refineries,” the official told BusinessLine.
Asked whether higher American oil imports could mean replacing Iranian crude, the official said: “We are dealing with two issues separately and our stand has been communicated to the US.”
According to analysts, some of the U.S. grades would be suitable for India’s refiners, but they will have to compete commercially with crudes with shorter travel times, so U.S. oil could serve as spot purchases for Indian companies when the arbitrage works.