India has joined China in saying it will not cut back on oil imports from Iran, despite stiff new US and European sanctions designed to pressure Tehran over its nuclear program.
“It is not possible for India to take any decision to reduce the import from Iran drastically because, after all, the countries which can provide the requirement of the emerging economy, Iran is an important country among them,” Indian Minister of Finance Pranab Mukherjee told reporters on Sunday in Chicago.
India and China together accounted for 34 percent of Iran’s oil exports from January to September last year — slightly more than Europe, according to International Energy Agency (IEA) data.
The move is likely to be seen as a political victory in Iran, but it is unclear how Chinese and Indian companies will actually be able to pay for Iranian oil without running afoul of the sanctions, analysts said.
“It’s a blow,” said David Hartwell, senior Middle East analyst at IHS Jane’s, adding that Iran may have discounted prices to keep the Chinese and Indians on their side.
“If you have two major countries like India and China saying they will not abide by the sanctions, that’s going to keep a vital line open for the Iranians to continue to sidestep the sanctions and get foreign capital,” he said.
He added that India and China could just be trying to buy time to diversify their oil supplies and may steer away from Iran, especially if Saudi Arabia — India’s largest source of oil imports — were to ramp up production and offer an attractively priced alternative.
The EU last week agreed to ban from July 1 all imports of oil from Iran and froze the assets of its central bank.
India and China are ravenous energy consumers and rely heavily on imported oil. Iranian oil accounts for 9 percent of India’s oil consumption and 6 percent of China’s, IEA data showed.
Iran exports 2.5 million barrels of oil per day, about 3 percent of world supplies. About 500,000 barrels go to Europe and most of the rest goes to China, India, Japan and South Korea.
China has called for negotiations over Iran’s nuclear program. South Korea has been noncommittal about the sanctions, and Japan is seeking an exemption, saying its Iranian oil imports have steadily declined and probably will continue to do so.
Meanwhile, a German government source yesterday said that German Chancellor Angela Merkel would use a planned visit to China this week to encourage Beijing to reduce its imports of Iranian oil.
“It is in German interests that China does not raise its imports [from Iran]. It would be good if China would reduce its imports,” the government source told a news briefing ahead of Merkel’s trip to China that begins today.
The EU delayed until July the entry into force of the oil import ban because it also wants to avoid penalizing the ailing economies of Italy, Greece and others, which mainly rely on Iran for oil supply.
The EU strategy will be reviewed in May to see whether it should go ahead.