India Hangs On To Iranian Crude

While western powers continue to tighten the screws on Iran’s oil exports, India, the world’s fourth largest oil importer, continues to remain one of Iran’s largest customers after China.

Accordingly, Iran has continued to occupy a major space in India’s energy import basket although at a lower level as a supplier of crude. While the US has been pushing Saudi Arabia to help fill the gap left by Iranian exports, India doesn’t want to depend too heavily on ersatz Saudi supplies as it could weaken New Delhi’s position in future price negotiations. In addition, it has become apparent that India’s foreign policy position on America and Iran is to try to back away from taking either side.

Ergo back in August, PM Singh made it a point to travel to Iran for the 16th Non-Aligned Movement (NAM) summit, which emphasized the need to enhance business relations between the two nations. According to the Tehran Times,

Foreign Secretary Ranjan Mathai held talks with deputy foreign ministers of Iran and Afghanistan in Tehran to explore ways to expand trade and transit cooperation, including investment, among the three countries, starting with the Chabahar Port.

It was agreed that a joint working group (JWG) comprising representatives of the three countries would meet within next three months at Chabahar to take the discussions forward, said a joint statement after the trilateral talks.

The meeting, initiated by the Iranian side, also discussed the report by the Indian Ports Association (IPA) on a slew of commercial activities which could be taken up through the port in the sanction-hit country.India is looking at various possibilities to develop the infrastructure at Chabahar port as an alternative route to Afghanistan that bypasses Pakistan.

The meeting acquires an added significance against the backdrop of the phased withdrawal of international combat troops from Afghanistan by 2014.

Along with port development, it has been speculated that India may possibly setup a barter mechanism where India would pay for imported crude through the transfer of goods, commodities, or investments in infrastructure projects. The development of Chah Bahar could be the first step in that direction, although nothing is certain.

Iran stood sixth in the list of India’s suppliers of oil in July, compared to second position earlier this year. India has officially declared its intention to cut Iran oil imports by 15% fiscal year ended March 31, 2013. With long-standing relations with Iran, it will be interesting to see how far India is willing to go to satisfy western demands.

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