By Abhijit Neogy & Nidhi Verma – Reuters January 12, 2012
India will keep doing business with Tehran and sees no reason to seek a waiver from the United States that would protect buyers of Iranian oil from a fresh round of sanctions, a senior Indian cabinet minister said on Thursday.
“Why should we seek waiver from the U.S.? We have done business with Iran earlier and will continue to do business,” the minister, who has knowledge of the matter but did not want to be named as the issue is confidential, told Reuters.
The minister said government officials would visit Iran next week and find ways to pay for oil in light of U.S. financial measures designed to block the trade.
The minister’s comments echo industry sources who told Reuters on Wednesday New Delhi may not seek a waiver from the sanctions, as the government appeared to believe the 120-day exemption would not offer a lasting solution.
Other major buyers of Iranian crude such as Japan and South Korea do intend to secure such waivers.
The United States and its allies in Europe and elsewhere are putting pressure on Iran to curb a nuclear programme they worry is aimed at developing an atom bomb. Iran says its goal is to produce nuclear power.
New U.S. laws, authorised on Dec. 31, make it even tougher for financial institutions to deal with Iran’s central bank, the main clearing house for the country’s oil payments.
The laws allow waivers to firms in countries that significantly reduce dealings with Iran, or at any time when it is either in the U.S. national interest or necessary for energy market stability.
The sanctions have faced India with a dilemma as it strives to balance the need to keep importing about $12 billion of Iranian crude annually without upsetting ties with Washington.
A different senior Indian official said on Thursday a final decision on whether to seek a waiver had not yet been made and would depend partly on the outcome of next week’s trip to Iran.
The decision would also depend on whether India could find adequate alternative sources of oil.
Options being looked at to cope with the U.S. measures include payment in Indian rupees or a trade barter system, the official said.
Officially the Indian government says it has not asked refiners to reduce imports from Iran but companies are already seeking alternative supplies, fearing an existing payment conduit for Iranian oil could snap under sanctions pressure.
Previous sanctions already made it harder for India to import the 350,000-400,000 barrels per day (bpd) it buys from Iran, about 12 percent of its oil needs. In 2010, the central bank scrapped a long-standing clearance mechanism, triggering a scramble by importers to find a new way to pay.
Since last year, Turkey’s Halkbank has routed India’s payments to Iran, but that conduit is seen by the government as unstable in the face of the latest sanctions.
Halkbank has already refused to open an account for state-run Bharat Petroleum Corp for oil from Iran.
The Indian delegation including officials from the central bank and the finance ministry will visit Tehran from Jan. 16-21 to explore alternative routes of payment to ensure supplies without breaching sanctions.
“This a technical issue but I am confident they will find a solution and a payment mechanism option soon,” the Indian minister said.
Earlier on Thursday an Indian oil ministry official denied comments to Reuters from industry sources saying the government had asked refiners to reduce Iranian oil imports, adding the existing mechanism through Turkey was working but that India was also looking for alternative supplies.
He did not explain why India was looking for alternative supplies. Indian refiners have gradually started buying more from sources such as Saudi Arabia, Iraq and the United Arab Emirates.