NEW DELHI, Feb 21 (Reuters) - India is pushing refiners to reduce oil imports from Iran by at least 10 percent for 2012/13, sources at two of the companies said, as tighter Western sanctions impact Iran’s trade.
India is Iran’s second-biggest market after China and the Islamic Republic provides about 12 percent or about 370,000 bpd of the Asian economy’s oil needs.
The government had indicated companies should cut their imports from Iran by about 10-15 percent, one source said, while the other source said the cut should be “substantial”.
The suggestion from the government to cut comes even as Iran has tried to sell extra volumes to Indian refiners on long credit terms, the sources said.
Tehran has found it increasingly difficult to sell oil in the face of a European Union embargo from July 1 and a cut in imports by China over a price dispute, the sources said.
State-run HPCL has already said it will cut imports by about 15 percent to 60,000 barrels per day (bpd) in its annual contract with Iran which starts from April 1 while privately-owned Essar is sticking to 100,000 bpd.
Other refiners have agreed volumes but have not yet signed deals with Iran, Reuters was told by the sources. A NIOC executive Reuters attempted to contact in Tehran was unavailable for comment.
India has said it will only abide by United Nations sanctions, and said other sanctions do not apply to it. It had said it would not seek a waiver from Washington to fresh U.S. sanctions calling for importers of Iranian oil to make substantial cuts.
But India has struggled to find ways to pay Iran after the United States made dollar transactions almost impossible under financial sanctions.
Refiners have used Turkey’s Halkbank for payments in euros since the middle of 2011, but are unsure how long that route will last given tougher EU sanctions. Turkey is seeking membership of the EU.
New Delhi and Tehran have set up a payment method using the rupee, which is not freely traded on international markets, as a possible substitute for euro payments through Halkbank for some trade.
The two are trying to increase the flow of exports from India to Iran to redress the existing trade imbalance, which sees the value of Iranian crude exports to India far outweigh the value of India’s total exports to Iran.
India imports about $11 billion of crude a year from Iran while its exports are just short of $3 billion.
In 2011/12, crude imports will be lower than the previous fiscal year’s 370,000 bpd due to payment problems triggered when India’s central bank scrapped a long-standing clearing house mechanism in December 2010 under U.S. pressure. (Reporting by Nidhi Verma; Editing by Jo Winterbottom)