WASHINGTON: Obama administration
officials say they are worried India may run afoul of a new US law restricting
payments for Iranian oil, forcing the White House to impose sanctions on one of
its most important allies in Asia.
So far this year,
India is failing to cut back its purchases of Iranian oil, which may force
President Barack Obama to impose penalties as early as June 28, according to
several US officials.
The
US law, which targets oil payments made through Iran’s central bank, applies in
any country that doesn’t make a “significant” reduction in its Iranian crude
oil purchases during the first half of this year. If India fails to
sufficiently cut Iranian imports, Obama may be compelled to bar access to the
US banking system for any Indian bank processing oil payments through Iran’s
central bank, the US officials said.
While
New Delhi hasn’t asked refiners to stop purchasing Iranian crude, the
government has told processors to seek alternative supplies and gradually reduce
their dependence on Tehran due to increasing pressure from the United States in
recent weeks, three Indian officials with direct knowledge of the situation
said.
India hasn’t
significantly cut imports this year because refiners’ annual crude term deals with
Iran typically run from April to March, they said.
The
planned reductions will start only when new annual contracts begin next month,
the Indian officials said.
“Given
the level of trade, and in particular oil, between Iran and India, targeting an
Indian entity that facilitates Iran’s access to the international financial
market should be top of mind for the US Treasury,” Avi Jorisch, a former
Treasury Department official who is now a Washington-based consultant on
deterring illicit finance, said in an interview.
India bought an
average of 328,000 barrels a day of Iranian crude in the first six months of
last year, making it the No 3 buyer, behind China and Japan and ahead of South
Korea, according to the US Energy Information Administration. Iran is the No 2
producer in the Organisation of Petroleum Exporting Countries.
The US government may
not be aware that India’s biggest buyer of Iranian oil, state-owned Mangalore
Refinery & Petrochemicals, plans to import less from Iran starting next
month, according to two officials with direct knowledge of the matter.
Oil
Minister S. Jaipal Reddy, Finance Minister Pranab Mukherjee and Foreign
Secretary Ranjan Mathai have said India will continue to buy Iranian oil to
meet its growing energy needs. While the Indian government has an excellent
record of enforcing United Nations sanctions on Iran, India has objected to
unilateral US sanctions.
“We
abide scrupulously by UN authorised sanctions,” Indian Foreign Ministry
spokesman Syed Akbaruddin said in a phone interview. While restrictions imposed
by individual countries “have an impact on commercial interaction, from a legal
perspective there is nothing that binds us to follow them”.
The
latest shipping data shows India and South Korea sharply increased oil
purchases from Iran in January, according to a report released on Wednesday by
the International Energy Agency in Paris. China
halved its imports from Iran, from 550,000 barrels a day in December to 275,000
barrels a day in January, following a dispute over pricing terms that
has now been resolved, the report said.
The
new US law targeting Iranian petroleum transactions doesn’t specify by what
percentage a nation must reduce its Iranian oil imports to qualify for an
exemption from sanctions.
Officials
in Washington said they were looking for cuts of around 15 per cent in volume,
though they might consider whether buyers have extracted significant price
discounts, thereby depriving Iran of revenue.
The
US has offered India help in brokering deals with alternative suppliers
including Iraq and Saudi Arabia. Riyadh has offered to replace any shortfall,
according to US and Indian officials
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