A Major Indian Refinery Abandons Purchase of Iranian Oil

Three sources have informed Reuters that the large oil refinery 'Hindustan Petroleum Corp' (HPCL) has decided to abandon the purchase of crude oil from Iran after its insurance company refused to cover shipments of Iranian oil due to U.S. sanctions. According to Reuters, this decision by the state-owned refinery, which is the third-largest oil importer in India, was made this month, and the three sources preferred to remain anonymous due to the 'sensitivity' of the matter. The refinery had renewed its insurance in July, but under new regulations, the insurance company does not cover potential incidents related to oil purchased from Iran. The 'Hindustan' refinery intended to import one million barrels of crude oil from Iran earlier this month, and when it failed to sell it to other buyers, it canceled its contract. India is the second-largest buyer of Iranian oil after China, and according to Reuters, if insurance companies refuse to insure oil shipments destined for these countries, similar decisions may be taken. The United States, following its announcement of withdrawal from the JCPOA, plans to re-implement sanctions against the Islamic Republic starting in November. Following this decision from Washington, the insurance company's regulations changed in July, which is why it was unable to insure Iranian oil. According to this report, the 'Hindustan' refinery has a daily capacity of only 20,000 barrels of crude oil from Iran, but other refineries in the country with larger capacities may also face similar issues. The 'Hindustan Petroleum Corp' refinery has not responded to Reuters' request for comment on this news. If oil companies do not reduce crude oil imports from Iran to zero by November 4, they will face penalties from the U.S. However, since banks, shipping companies, and insurance companies have already halted their business relations with Iran, the problem of purchasing crude oil from Iran began much earlier than November 4. Bijan Zanganeh, Iran's oil minister, had previously expressed hope that Tehran could sell 500,000 barrels of crude oil daily to India. Meanwhile, Reuters recently reported that the Indian government has asked all refineries that are customers of Iran to be prepared to stop purchasing Iranian oil. Over the past year, India significantly reduced its oil purchases from Iran due to pressure on Iran to agree to a contract for the development of the 'Farzad B' gas field with this country. However, with Iran's agreement to grant this project to Indian companies, the country increased its oil purchases in the first quarter of the current Indian financial year, which almost coincides with the solar year, by 24% to 647,000 barrels per day. Reuters had previously reported that due to the return of U.S. sanctions, India's oil imports from Iran in the last month (June) decreased by 15.9% compared to the previous month, reaching 592,800 barrels per day. This decrease in oil purchases from Iran occurred while India increased its total oil imports by more than 10% in June. The U.S., Azerbaijan, Mexico, and Middle Eastern producers have increased their exports to India. One of the major customers of Iranian oil in India also stated on July 3 that they have no problem even with completely cutting off Iranian oil imports and have sufficient options in this regard. Sanjeev Singh, the head of the 'Indian Oil' refinery, told Bloomberg that if Iranian oil sales decline, Saudi Arabia alone could compensate for a significant portion of the global market shortfall.