London, Asharq Al-Awsat—Iranian oil exports face further setbacks after the Indian Oil Corporation (IOC) announced plans to reduce its imports from the heavily sanctioned Islamic republic by 23 percent, according to Veerappa Moily, the Indian minister of petroleum and natural gas.
Iranian crude exports—targeted by US-led economic sanctions—reached their lowest figures in a decade earlier this year, when shipments dropped to 700,000 bpd in May.
Washington aims to further reduce this number to 500,000 bpd—less than a quarter of Iran’s exports before the current round of sanctions.
The state-owned IOC is one of India’s main oil refiners. It imported 1.56 million tonnes of oil from Iran in the last fiscal year, equivalent to 31,200 barrels per day (bpd).
Moily confirmed in a written statement that the IOC was not severing links with Iran completely, and has entered a contract for 24,000 bpd, the Reuters news agency reported.
This reduction of 22.63 percent is in line with US and European sanctions, imposed due to suspicions over Iran’s controversial nuclear program, which the Islamic Republic insists is wholly peaceful.
Earlier this year, Indian refineries were threatened with having their insurance invalidated, as the insurance companies covering oil refineries are based in Europe, where strict sanctions are in place to prevent involvement in the Iranian financial markets.
“There are issues related to payments as well as the insurance issues faced by oil refineries due to the sanction [against Iran]. That’s why the import is down,” an Indian government official said at the time.
At that time, Iranian shipments accounted for 7.2 percent of India’s total imports—down from 10.5 percent the previous year.
The Iranian oil minister, Rostam Qasemi, visited India late May to meet with Veerappa Moily and other Indian officials, in an attempt to increase exports to the emerging Asian nation.
The diplomatic trip was unsuccessful when Iranian offers to provide insurance to refiners were rejected.
“Iranian insurance companies are under sanctions, how can I take cover from them?” one Indian oil executive said after the talks.
As with other key Iranian oil clients, such as South Korea and Japan, India has begun sourcing its vast energy needs from other countries.
When Moily visited Iraqi officials in Baghdad last month, he said that they had “assured that they were ready to supply as much as India wants. We will finalise our requirements soon after due negotiations. It is also open to considering more favourable commercial terms, including extending the interest-free credit period from 30 to 60 days.”
Much of the IOC payments to Iran had been conducted in euros through Halkbank in Turkey, until they were halted in February under pressure from the US sanctions. Such payments accounted for USD 415 million throughout the previous fiscal year, which ended in March.
The remainder of the USD 1.26 billion has been paid in rupees, through a local Indian bank.
According to its government, Iran holds roughly 10 percent of the world’s proven oil reserves, but has become increasingly unable to export its oil due to sanctions imposed by the US and the UN.
At the beginning of the year, Rostam Qasemi affirmed for the first time that sanctions had affected the Iranian economy. Speaking on January 7 he acknowledged that petroleum exports and sales had fallen by at least 40 percent.
The announcement came in the wake of both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency reporting that, by the end of 2012, exports of Iranian crude had fallen by around a million bpd.