Indian State Bank to 'Stop' Payments for Iranian Oil

Reports indicate that the Indian state bank has informed the country's refineries that it will stop payments for Iranian oil starting in November of this year, approximately six months from now. Reuters reported on Friday, June 15, citing statements from Indian Oil Corporation, that this could even impact purchases of Iranian oil within two months (by late August), as the Islamic Republic has granted Indian refineries the privilege to pay for oil imported from Iran two months after the delivery of the shipment. Therefore, the Indian state bank will only be able to transfer payments for oil that Iran exports to the country's refineries by the end of August. In this context, the Times of India reported on Saturday that officials in India are considering negotiating with the U.S. for an exemption regarding these payments. Many countries that buy Iranian oil, including India itself and even European officials, have stated that they will not comply with unilateral U.S. sanctions against Iran. However, Reuters notes that banks, oil companies, and refineries purchasing Iranian oil are connected to the U.S. financial system and do not want to be placed on the U.S. sanctions blacklist. The Times of India mentions that using the Indian rupee for payments for Iranian oil is also a solution that Indian officials are considering. According to a statement from an Indian official, the trade balance between Iran and India is only six billion dollars in favor of Iran, and the Indian rupee can be used for bilateral trade. He stated that in exchange for selling oil, Iran could import food, chemicals, medicines, etc., from India. However, the six billion dollar figure mentioned in the report only refers to the difference in the value of Iranian oil exports (9 billion dollars last year) and total Indian exports to Iran (3 billion dollars), while Iran also exported 2.735 billion dollars worth of non-oil goods to India last year. On the other hand, the Indian rupee is not a global currency and can only be used within India for purchasing goods. The report adds that Indian refineries have requested further discounts on oil prices and longer payment periods from Iran. Meanwhile, Reuters has reported that the costs of transporting Iranian oil to India have increased somewhat. According to this report, Indian Oil Corporation intends to replace Iran with other Middle Eastern countries. Iran accounted for a ten percent share of India's oil imports (4.5 million barrels per day) last year. However, India is Iran's second-largest customer after China. Additionally, the Reliance refinery, which is the largest oil consumer in India, intends to stop importing oil from Iran. Another Indian refinery, Nayara, which has Russian oil company Rosneft as one of its major shareholders, has reduced oil imports from Iran since the beginning of this month. Besides the Indian state bank, the German bank IAH is also involved in the payment for Iranian oil exports to India. Payments for Iranian oil exports to India are currently made in euros. The U.S. will enforce its oil sanctions against Iran by November 4 of this year, and only companies that significantly reduce their imports of Iranian oil during each six-month period will be able to obtain exemptions from the sanctions. Recently, the International Energy Agency reported that U.S. sanctions could reduce Iran's oil production by 900,000 barrels per day (23 percent) by the end of next year. Meanwhile, Bloomberg reported on Friday that preliminary statistics for the first half of this month indicate that Iran's oil exports have decreased to 2.114 million barrels per day, the lowest level in the past six months.