India defies sanctions, won’t cut Iran oil imports

India and China are ravenous energy consumers and rely heavily on imported oil. Iranian oil accounts for 9 per cent of India's oil consumption and 6 per cent of China's, according to the latest data from the IEA. -File Photo

MUMBAI: India has joined China in saying it will not cut back on oil imports from Iran, despite stiff new US and European sanctions designed to pressure Tehran over its nuclear program.

”It is not possible for India to take any decision to reduce the import from Iran drastically because, after all, the countries which can provide the requirement of the emerging economy, Iran is an important country amongst them,” India’s finance minister Pranab Mukherjee told reporters Sunday in Chicago.

India and China together accounted for 34 per cent of Iran’s oil exports from January to September of 2011, slightly more than Europe, according to International Energy Agency data.

The move is likely to be seen as a political victory in Iran, but it’s unclear how Chinese and Indian companies will actually be able to pay for Iranian oil without running afoul of the sanctions, analysts said.

”It’s a blow,” said David Hartwell, senior Middle East analyst at IHS Jane’s, adding that Iran may have discounted prices to keep the Chinese and Indians on their side.

”If you have two major countries like India and China saying they will not abide by the sanctions, that’s going to keep a vital line open for the Iranians to continue to sidestep the sanctions and get foreign capital.”

He said India and China could just be trying to buy time to diversify their oil supplies and may steer away from Iran, especially if Saudi Arabia, India’s largest source of oil imports, were to ramp up production and offer an attractively priced alternative.

The European Union last week imposed an oil embargo against Iran and froze the assets of its central bank. In December, the US said it would bar financial institutions from the US market if they do business with Iran’s central bank.

India and China are ravenous energy consumers and rely heavily on imported oil. Iranian oil accounts for 9 percent of India’s oil consumption and 6 percent of China’s, according to the latest data from the IEA.

Iran exports 2.5 million barrels of oil per day, about 3 per cent of world supplies. About 500,000 barrels go to Europe and most of the rest goes to China, India, Japan and South Korea.