Two Indian oil PSUs place orders for Iranian crude

Two Indian state-run oil companies have placed orders for Iranian oil to be delivered in November, Petroleum Minister Dharmendra Pradhan said on Monday.

The move comes in apparent defiance of U.S. sanctions targeting Iran’s crude oil exports that come into effect on November 4.

The Indian government has repeatedly requested Washington for a waiver of these sanctions for India, but has not received an affirmative response so far.

“Two days ago, two of our companies have placed orders with Iran for oil for the month of November,” Mr. Pradhan said at the inaugural conference of the Energy Forum.

“The question is, has the waiver been granted or not. We don’t know if the waiver has happened or not, but the Indian companies have gone ahead and booked the order,” he said.

The two companies in question are Indian Oil Corporation and Mangalore Refinery and Petrochemicals, with a total order quantity of 1.25 million tonnes of crude, according to an official in the Petroleum Ministry.

The U.S. embassy did not respond to requests for a response to the Minister’s statement.

On November 4, a second round of U.S. sanctions against Iran will target the oil industry, and impose penalties on oil companies, refineries, insurers and transport companies dealing with Iran.

Sanctions deadline

According to an executive order (EO 13846) issued by President Donald Trump, all American and non-American entities were given a six-month “wind-down” period from May 2018, in which to “zero out” all transactions with designated Iranian oil companies and port operators.

Although countries like Turkey, Russia, and China have indicated they will go ahead with their oil trade with Iran, the European Union will probably accede in a large measure, given the exposure of their companies to the U.S. banking system.

India had thus far not publicly articulated its stand on the issue, but with the advance orders placed for November, has made it clear that India will not “zero out” its oil intake from Iran. While private companies like Reliance and Nayara Energy (Essar) have had to drastically reduce their purchases, public sector companies, who are more immune to U.S. strictures, and already have alternate banking arrangements and a “rupee-rial” mechanism, are staying the course for now.

Mr. Pradhan also said he had spoken to Saudi Arabia’s Oil Minister two days ago regarding the higher oil prices and how prices should not be set with the interest of producing countries but also by keeping consuming countries’ interests in mind.

“The way certain major economies are handling their domestic currency, all the major currencies of the world are affected by this. These are the two factors affecting oil prices. The Indian government is working on this and I am confident gradually things will be normalised,” the Minister said.

He also categorically stated that the government’s directive to oil companies to absorb a ₹1 per litre hit to the price of petrol and diesel was not a reversal of the deregulation of oil prices.

However, he added that state-run oil companies must look beyond their profits to easing people’s burden.

“The basic point is that they are all government companies,” Mr. Pradhan said. “Profitability is their motto, but public interest is also their responsibility.”