India is unwilling to cap oil imports from Iran

oil-plantSenior government officials told reporters on India’s energy strategy that our nation is unwilling to impose restrictions or cap its oil imports from Iran, and will continue its energy ties with Tehran as long it gets a “good deal” and logistic support. Even one national insurance company has stepped in provide reinsurance for oil imports from Iran staving a crisis for now.

New Delhi’s reiteration of continuing oil imports from Iran comes even as crude oils imports from Iran has been slowing down in view of the US pressure to bring down trade ties with Tehran. India imported 12% of its oil requirement from Iran. India’s stand on energy security comes even as it assumes increased significance in the foreign policy and trade relations. Prime Minister Manmohan Singh, back from the BRICS summit a month ago, is on his way for an inter-government conference with Berlin.

Two Indian insurance companies General insurance Corporation RE have recently agreed to provide insurance to the oil imports from Iran, thereby removing a great hurdle in oil imports.

The major problem over the months for the nations refining companies is been the lack of logistic support, particularly in financing. Some of these companies include Chennai Refineries who are configured to give the best production yields on Iranian crude oil. The Reserve Bank of India (RBI) had to work out special payment channels for the Iranian oil imports as restrictions were imposed on dollar trade with Tehran.

One of the government officials in direct knowledge of the trade said that, India is also seeking to diversify its oil import basket and the emergence of Iraq as a key oil exporter in recent times has shifted the domestic oil axis significantly. India is however, unlikely to officially admit that imports from Iran are being gradually reduced following the mounting US pressure.

Reliance Industries BSE 0.61 % Ltd (RILBSE 0.61 %), the country’s largest private oil company used to export a large portion of their petroleum produce, primarily gasoline, to Iran a few years back. But financing difficulties arose when most leading banks and financial institutions from the developed countries refused to be associated with Iranian trade.

Talks of an India-Pakistan-Iran pipeline, that was proposed to ensure regular oil supplies to energy starved India, too has almost fallen through with it remaining a paper project. India is instead negotiating with Turkmenistan Afghanistan and Pakistan for a cross country pipeline. Plans of importing some of Iran’s natural gas as liquefied gas too is now in cold storage even Indian oil BSE 0.31 % companies led by ONGC Videsh Ltd (OVL) wait to begin production from their oilfield at Farsi.