U.S. May Sanction India Over Level of Iran-Oil Imports

[RoccoR]

cyppok, et al,

Yes, the current strategy could lead to unintended consequences; both militarily and "economically."

Expecting India or China to replace Iranian Oil at their own expense is beyond stupid.

Refineries are set up to refine a specific set of oil type, light, heavy, and quiet a few other factors. Efficiency and cost wise revamping a refinery is a capital intensive process (VERY VERY VERY EXPENSIVE!) it not only is expensive for the operator but for the market as well. Since demand is shifted to existing refineries in that specific market and outside producers shifting costs up for EVERYONE! even globally a little bit, but especially people in those markets.

But nobody cares about the economics of the thing all that matters is political expediency and repetition of a mantra.

(COMMENT)

This could develop a rift in the P5+1 consensus, as well as create a perfect storm for oil speculation. If the market of speculators perceives that the current negotiations will result in an act of war, they will start buying up oil, hold it in stasis, --- and create an artificial shortage. Then when the price is driven higher, sell it at a huge profit. The mere fact that the governments involved have threatened additional sanctions in a number of directions, and promoted the idea of a pre-emptive strike - have already driven the upward and given speculators a windfall profit. And this has helped Oil Speculators and has caused the Congress to lend its tacit approval through inaction.

Most Respectfully,
R

[cyppok]

The oil speculation is already full steam ever since the push for pressure began that is not an issue. The issue is economic sanctions against others to toe the line for your ambition. That is the aspect that deserves attention.

Here we in the states are asking countries what is less painful. Spending billions to retrofit or trade ties into the US market, and not everyone will choose the later simply because some are not as reliant as others(china is ultra reliant).

The curious aspect of this is the blowback in the form of expectations vis a vis the future. Imagine being asked by China or someone else to join in the trade war pressure push on a third country since they supported us in our argument with someone else. And here we transition to a world where there are alliance playoffs for economic gains/losses in an almost virtual trade war that has very real implications. This is only a few steps away from full on tarriff wars and spiraling into other areas of pressure positioning.

I see this as a tension movement. The ripples that we are getting to see are not the point. Where they hit and what counter ripples go off is. Curiously Russia is still not in the WTO (which is a good thing in my view I hope they never join and the trade union they set up works. I feel that global trade should be one country to one country basis without interconnected pre-set up rules that favor those whom set them up. Ergo the club needs to fall apart and everyone should play with everyone else on mutual accepted rules between the two parties and not three (them their partner, and everyone else in the club)).

A bit verved off there in the end.

[DarthSiddius]

Indians Host Clinton While Also Wooing Iran

By THE NEW YORK TIMES

NEW DELHI — Admittedly, the timing was awkward. Secretary of State Hillary Rodham Clinton arrived in New Delhi this week after declaring that India should reduce imports of Iranian oil and comply with Western sanctions. Yet across town, India and Iran were trying to figure out ways to do business together.

In the main ballroom of a five-star hotel, an Iranian trade delegation met with Indian exporters, exchanging cards, sipping tea and nibbling on cookies. The Iranians met one Indian trade group on Monday, another on Tuesday and had more meetings planned in the country’s financial capital, Mumbai — a business courtship seemingly in open defiance of Mrs. Clinton’s hard line.

“I am sure the future of India-Iran trade is very good,” said Yahya Al Eshagh, president of the Tehran Chamber of Commerce, Industries and Mines and the leader of the Iranian delegation.

No doubt, this week’s diplomatic choreography — with the Americans on one side of the capital and the Iranians on the other — could easily have been interpreted as a deliberate provocation at a moment when the once-shiny partnership between India and the United States seems to have dulled. But if the scheduling was poorly planned, the situation actually provided an illuminating window into the realpolitik of Iranian sanctions and of how the United States and India, as well as China, are all trying to achieve their divergent goals.

The Obama administration, in trying to squeeze Iran by choking off foreign currency that might be used for its nuclear program, is pressuring Iran’s oil customers to reduce imports sharply or face punitive sanctions as soon as next month. Earlier this year, Mrs. Clinton announced exemptions for Japan and 10 European nations but provided no such waiver to India and China, the biggest importers of Iranian crude and the rising powers of Asia.

China and India had already rejected the threat of sanctions and vowed to act in their national interests. The Obama administration called on both countries to make significant reductions of imports. But behind the scenes, officials from all three countries were exploring ways to reduce Iranian oil exports while engineering workaround mechanisms so that India and China could pay for the oil they do buy. Indeed, both countries now have arrangements to buy Iranian oil in their domestic currencies — rather than the dollar — that could increase their exports to Iran and also make Iranian oil cheaper.

“It is a lot more complicated with India and China than with Japan or South Korea,” said Valerie Lincy, executive director of the Wisconsin Project on Nuclear Arms Control, which tracks Iran’s nuclear program. “The economies are structured differently, the amount of oil they are importing from Iran is different and the geopolitics are different.”

The Obama administration, which has courted India as a geopolitical partner, recognizes that India has its own interests to defend: Indian leaders want to maintain good relations with Washington, and avoid crippling sanctions, yet India is heavily dependent on foreign oil, meaning that drastic reductions could damage an already wobbling Indian economy.

Moreover, Indian politicians are loath to appear to be doing the bidding of Washington, even if quietly they are working to comply. Analysts say the Indian government has ordered domestic refineries to reduce imports of Iranian oil by more than 15 percent.

“India is clearly making an effort to reduce its dependence on Iran, and this is recognized by the U.S.,” said Harsh V. Pant, an India specialist at King’s College in London, in an e-mail. “But domestically, the Indian government cannot be seen to be buckling under any sort of U.S. pressure. So there is a lot of talk of expanding trade ties with Iran.”

Mrs. Clinton’s visit to India was the last stop in an Asian tour that began in China. Her agenda in China was overtaken by the plight of the blind dissident Chen Guangcheng, but Mrs. Clinton also spoke to Chinese leaders about their progress on reducing oil purchases from Iran.

In New Delhi, Mrs. Clinton discussed Iran and other issues with Prime Minister Manmohan Singh, while also meeting with Sonia Gandhi, president of the governing Indian National Congress Party. On Tuesday, she used a brief news conference to praise India as “a strong partner,” adding that India and the United States share a common goal of preventing Iran from getting a nuclear weapon.

“We commend India for the steps its refineries are taking to reduce its dependence on imports from Iran,” she said. “And we have been consulting with India, and working with them on some areas on alternative sources of supply. There’s no doubt that India and the United States are after the same goal.”

India’s external affairs minister, S. M. Krishna, appearing with Mrs. Clinton, portrayed India as acting in its own self-interest, while noting that Iran and India have longstanding cultural, economic and religious ties that cannot be reduced to the single issue of oil.

“It is natural for us to try and diversify our imports of oil and gas to meet the objective of energy security,” Mr. Krishna said.

Even as India reduces its oil imports from Iran, officials have been trying to figure out how to pay for its remaining Iranian oil purchases. Banking restrictions now make normal transactions with Iran almost impossible. This is why the Iranian trade delegation is in town: Iran has agreed to accept payment for 45 percent of oil sales to India in rupees, the Indian currency, much of which will be used to buy Indian exports.

Mrs. Clinton never mentioned the presence of the Iranian delegation, nor the rupee payment system, yet American officials do not seem to mind. Mark Dubowitz, an Iran specialist in Washington, said a primary purpose of sanctions is to starve Iran of the dollars and euros it needs to finance the country’s nuclear program. In the past, India paid for most of its oil purchases in dollars; under the new arrangement, India will buy nearly half its Iranian oil in rupees, which are not a fully convertible currency.

“This rupee account is very helpful,” said Mr. Dubowitz, executive director of Foundation for Defense of Democracies. “They can’t convert rupees into dollars or euros. They can’t repatriate rupees back to Iran. So the only thing they can do is buy Indian goods.”

At almost precisely the moment on Tuesday that Mrs. Clinton was speaking at her news conference, the Iranian trade delegation was a few miles away, in a basement conference hall of one of the city’s most prominent cultural centers, watching a slide show on Indian exports, including photos of Indian rice, tractors, auto spare parts, pharmaceuticals and more.

“We are very keen to work with you,” said Anil K. Agarwal, a businessman and officer with the Associated Chambers of Commerce and Industry of India.

In fact, the new payment arrangement for oil may help India reduce its enormous trade imbalance with Iran. Last year, India spent $988 million on Iranian imports, mostly on oil, more than 10 times the $91 million in goods that India exported to Iran.

Iranian leaders deny that they are developing nuclear weapons and say their nuclear program is for the peaceful development of energy. Mr. Eshagh, the leader of the Iranian delegation, never directly mentioned the sanctions, nor the fact that Mrs. Clinton was in town. But he did allude to “certain circumstances” and “some problems” that made trade more complicated. Still, he struck an upbeat tone.

“There is a vast potential for exports and imports between the two countries,” Mr. Eshagh told the audience, speaking through an interpreter. “We feel there is no difficulty regarding goods and their prices.”

It remains to be seen how extensively, or effectively, the new rupee payment system will be used. American officials will also be watching to ensure that no goods that are banned under the sanctions are exported to Iran under the system. Wheat, rice and pharmaceuticals are currently outside the sanctions, but sales of certain technologies, for example, are a cause of concern.

The question now is whether India has made the “significant reductions” required for exemptions. Indian officials believe they have now met the American demand, and many analysts expect the Obama administration officials to grant an exemption during a high-level Strategic Dialogue between the two countries next month in Washington.

Link

[Double Edge]

India's oil imports from Iran plunge 34% in April | Indian Express | May 09 2012

Reuters Posted online: Wed May 09 2012, 15:37 hrs

New Delhi : India's crude oil imports from Iran declined by about 34 per cent in April compared with March, deeper than expected and the first evidence of New Delhi implementing cuts in supplies from the sanctions-hit nation under annual deals that began last month.

State-run buyers are at the forefront of reductions, leaving privately-owned Essar the biggest Indian client of Iran, tanker discharge data showed, just as the U.S. praised steps taken by India's refiners to back Washington's pressure on Tehran.

The US has already granted waivers to the sanctions for Japan and 10 European countries but has left out China and India, Iran's biggest clients.

US Secretary of State Hillary Clinton said on Monday India needed to do more and said a decision on granting a waiver was around two months away.

India's total oil imports from Iran in April fell to about 269,000 barrels per day (bpd) from 409,000 bpd in March and from about 449,000 bpd in April 2011, the data made available to Reuters showed on Tuesday.

Overall in the last contract year to March 31, 2012, India's purchases of crude from Iran were expected to be under 340,000 bpd, India's foreign secretary Ranjan Mathai said in March. Estimates compiled by Reuters based on company plans in July 2011 were for up to about 380,000 bpd.

Indian refiners are expected to cut volumes from Iran by over 20 per cent in this contract year on average, Reuters reported in March.

The shortfall is being made up with extra barrels from the world's biggest exporter, Saudi Arabia, as well as Iraq, which has leapfrogged Iran to be India's No. 2 supplier, among others.

Clinton said Washington was working with New Delhi to find replacements for Iranian oil when she was visiting India this week.

We commend India for the steps its refineries are taking to reduce imports from Iran and we have also been consulting with India and working with them in some areas on alternative sources of supply, Clinton said on Tuesday, while keeping up the pressure for even more.

Saudi Oil Minister Ali al-Naimi on Tuesday said the top oil exporter is pumping around 10 million bpd and is storing 80 million barrels to meet any sudden disruption in supplies.

The Kingdom stood ready to tap into its spare capacity of 2.5 million bpd if more crude was needed, he added.

Imports from Iran in January-April surged by almost a quarter to 405,000 bpd compared with last year when lifting of Iranian oil slowed due to payment problems caused when a finance conduit was closed under U.S. pressure.

In the first four months of this year, Iraq has emerged as India's second biggest supplier of oil replacing Iran, followed by Kuwait, Nigeria and the United Arab Emirates. Saudi Arabia continued to be the biggest oil supplier to India.

India's overall oil imports in January-April rose about 10 per cent from a year ago as the country expanded its refining capacity. Total oil imports in April declined 5.7 per cent from March and 2.2 per cent from April last year, the data showed, after stockbuilding in February and March.

India aims to raise its refining capacity from the current 4.3 million bpd to about 6.22 million bpd by 2016/17, while the local fuel demand is expected to rise to 152.94 million tonnes, Oil Minister S. Jaipal Reddy told lawmakers on Tuesday.

ESSAR REPLACING MRPL

In the January to April period, Essar Oil replaced Mangalore Refinery and Petrochemicals as the biggest buyer of Iranian oil. In April, Essar shipped in 119,200 bpd -- about 24 per cent less than March.

Indian refiners have been asked privately by the government to cut Iranian oil imports by at least 15 per cent even though publicly New Delhi maintains it does not support unilateral sanctions.

State-run MRPL imported about 19 per cent less oil in April from Iran compared with March at 90,200 bpd, the data showed, while Hindustan Petroleum Corp reduced its intake of Iranian oil by about 10 per cent to 60,000 bpd.

Essar has renewed its annual deal of 100,000 bpd with Iran for this fiscal year starting April 1, while MRPL has reduced the size of its deal to 80,000-100,000 bpd compared with 142,000 bpd in 2011/12, industry sources have said.

HPCL aims to buy 60,000 bpd oil from Iran compared with 70,000 bpd in 2011/12.

Indian Oil Corp, the country's biggest refiner, and Bharat Petroleum Corp. Ltd. did not buy any Iranian oil in April. IOC had bought about 75,000 bpd in March.

[Double Edge]

The flip side

Tehran Sets Trade Deals With India Amid Curbs | WSJ | May 09 2012

Tehran Sets Trade Deals With India Amid Curbs
By DEBIPRASAD NAYAK And BIMAN MUKHERJI

MUMBAI—An Iranian trade delegation to India has sealed deals to buy shipments of rice, sugar and soybeans from the South Asian country, as part of a plan for Tehran to use such pacts to get around U.S. financial sanctions on its oil shipments.

India has been unable to pay in full for Iranian oil imports because tightened U.S. sanctions have made it difficult to access U.S. dollars for transactions with Iran. Instead, Iran has agreed to accept payment in Indian rupees and sent a trade delegation to India this week to look for goods to buy with the money it earns.

The U.S. is threatening sanctions against financial institutions of countries that fail to significantly reduce oil imports from Iran before a June 28 deadline.

U.S. Secretary of State Hillary Clinton, on a visit to India this week, praised New Delhi for cutting back on purchases from Iran in recent months, but urged the country to make further reductions. A senior U.S. State Department official will travel to India next week to assess the country's ability to shift more oil purchases to countries such as Iraq and Saudi Arabia.

While reducing purchases, Indian officials say the country—which relies on imports for three-quarters of its crude needs—has to buy from Iran to meet growing local demand for oil.

The Iranian trade delegation, whose visit coincided with Mrs. Clinton's trip to India this week, shows the delicate balance New Delhi is trying to maintain between toeing Washington's line and continuing to buy oil from Iran.

A spokesman for the U.S. Embassy in New Delhi, Peter Vrooman, declined to comment on the Iranian trade delegation.

Yahya al Eshagh, president of the Tehran Chamber of Commerce, Industry and Mines, said: "We don't have anything to do with the visit of Hillary Clinton. We are very happy that we are doing our own business."

The Iranian trade delegation, which included government officials and representatives from private and state-owned companies, will wrap up its six-day visit Friday. Rafeeque Ahmed, president of the Federation of Indian Export Organisations, said private business groups had negotiated deals on agricultural commodities for shipment starting as early as this month.

Mr. Eshagh didn't disclose the size of the deals, but said both nations were looking to step up annual trade to $24 billion in the medium term from $14 billion now.

In February, Iran agreed to accept payment in Indian rupees for up to 45% of its oil exports to India, and the countries have set up a credit window between Indian and Iranian state-owned banks. That means Tehran has to find Indian exports to buy with the rupees it earns.

An Indian delegation of exporters traveled to Iran earlier this year to showcase products.

Transactions in the Iranian rial and in Indian rupees through the credit window already have begun, Mr. Eshagh said.

The U.S. is unlikely to be too worried by the payment mechanism—which Iran also has with countries such as Turkey, Iraq and Afghanistan—as it only gives Tehran access to Indian rupees and not a fully convertible currency such as the U.S. dollar, which it could use to further its nuclear program. The U.S. claims Tehran is using the program to develop nuclear weapons, while Iran says it is for peaceful energy development.

Washington, however, will be looking to see if India's overall imports of Iranian oil decrease in the months ahead, after they fell to about 9% of the country's total oil imports currently, from 12% last year. India now imports between $10 billion and $12 billion of crude oil from Iran annually.

The U.S. has exempted the European Union and Japan from potential sanctions after they significantly reduced oil imports from Iran. Washington says financial institutions from 12 other countries, including India, Turkey and China, could face sanctions unless they further reduce purchases.

With sanctions hitting the supply of goods from the U.S. and Europe, Iran is looking to buy food products and pharmaceuticals from elsewhere. It has turned to Australia, Canada, Russia and India to buy wheat, corn, soy meal and other commodities.

Iran has been negotiating to buy as much as three million tons of wheat from India, but the deal has gotten stuck over traces of fungal disease in crops from the country's northern breadbasket region. Members of the Iranian delegation said an Indian team will be visiting Tehran soon to discuss the issue. Indian officials argue most wheat crops have small traces of the fungal disease and say they believe Tehran is trying to push down the price by focusing on this.

Still, an Indian government official said that New Delhi is considering exporting wheat from other regions, such as the western state of Gujarat and central state of Madhya Pradesh, whose wheat crop is free of the fungal disease.

[Double Edge]

On June 11, Secretary of State Hillary Clinton issued the following statement on "Significant Reductions of Iranian Crude Oil Purchases":
Today I have made the determination that seven economies -- India, Malaysia, Republic of Korea, South Africa, Sri Lanka, Turkey and Taiwan -- have all significantly reduced their volume of crude oil purchases from Iran. They join the 11 countries for which I made this determination in March. As a result, I will report to the Congress that sanctions pursuant to Section 1245(d)(1) of the National Defense Authorization Act for Fiscal Year 2012 will not apply to their financial institutions for a potentially renewable period of 180 days.

U.S. Waivers Seven Countries for Reducing Iran Oil | PBS | Jun 11 2012

[DarthSiddius]

I say it was Mamta Banerjee who changed Hillary's mind and convinced her to not only waiver India but six other countries! :Dancing-Banana: