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Can Iran's crude oil imports be reduced to zero, can India afford it?

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发表于 2018-9-18 16:42:02 | 显示全部楼层 |阅读模式
Well-known energy analyst Nick Cunningham pointed out that India's imports of crude oil from Iran will be cut in half in the next two months, which will greatly weaken Iran's ability to find buyers for its crude oil.
Foreign media reported that India plans to cut crude oil imports from Iran in September and October. The move is aimed at catering to the hawkish US government, which will fully implement sanctions on the Iranian oil industry in November. The Trump administration had previously called on other countries to cut Iran’s crude oil imports to zero, but said that countries that have difficulty doing this will be given “lendent treatment”.

US Secretary of State Pompeo said on September 6: "As we have told each country, we have repeatedly told India that sanctions on Iranian crude oil will be implemented on November 4. We will consider exemptions when appropriate, but We expect each country to purchase Iranian crude oil to zero, otherwise it will be sanctioned."

A few months ago, the Iranian oil minister told the Indian refinery to prepare for Iran’s crude oil imports “substantially reduced or reduced to zero”. It is possible to reduce Iran’s crude oil imports, but reports that senior Indian officials refused to comply with the requirement to reduce Iran’s crude oil imports to zero.

Foreign media suggest that India's crude oil imports from Iran may fall to 360,000 barrels to 370,000 barrels per day in September and October, while India's crude oil imports from Iran from April to August this year were 658,000 barrels per day. . In fact, in the past few months, India has increased its purchase of crude oil from Iran, possibly to obtain more oil before the US imposes sanctions.

But Cunningham believes that India's crude oil imports from Iran cannot be gradually reduced to zero. Indian Prime Minister Modi has already faced enormous political pressure due to soaring fuel prices. The rise in oil prices has led to an increase in the cost of importing crude oil from India, which has led to a deterioration in India’s current account deficit and fiscal deficit.

This year's sharp rise in global oil prices continues to put pressure on the already weak Indian currency, and India has not been spared from the currency turmoil that hit emerging markets. So far this year, the Indian rupee has depreciated by more than 12% against the US dollar, making local oil prices more expensive.

To make matters worse, India last year reformed fuel prices, linking retail prices more closely to international prices. Today, with the soaring fuel prices, the Indian government can be described as "pressureful."

Bank of America Merrill Lynch analysts wrote in June this year: "The pressure on Indian consumers is huge, because India's annual per capita GDP is only $7,800, while the US is $62,200. With the Indian election, the Indian government has implemented a small amount. Fuel tax credits. If the fuel price system is more lenient for consumers, it will increase government borrowing and lead to a worsening debt situation. But India will not allow local demand to be naturally reduced."

But Platts believes that the Indian government is unlikely to end the reform of retail fuel prices, because reforms can reduce the government's financial burden. The Indian government is trying to keep these reforms, even if the election will come next spring.

Cunningham believes that the domestic political and economic pressures facing the Indian government will constrain the Indian government to cut Iranian oil imports too much, although the Indian government wants to maintain friendly relations with the United States. But given US Secretary of State Pompeo’s remarks, it’s no surprise that the White House has given India a cut in the way that India cuts hundreds of thousands of barrels of Iranian oil every day.

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