Prelims level : International Mains level : GS-II Governance, Constitution, Polity, Social Justice and International relations
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Why in News?

  • Petroleum Minister said the country plans to increase imports from major oil producing nations other than Iran, indicating that it will be acceding to the U.S. plan to reduce Iran’s oil exports to zero.


  • President Donald Trump’s announced that buyers of Iranian oil must stop purchases by May 1 or face sanctions.
  • The move, which took many market participants by surprise, ends six months of waivers which had allowed Iran’s eight biggest buyers of crude to continue to import limited volumes. The U.S announced that it would be cancelling the waivers from sanctions it had granted eight countries, including India, allowing them to import oil from Iran. Following the revocation of this waiver, any country violating the ban would face U.S. sanctions.
  • the government has put in place a robust plan for adequate supply of crude oil to Indian refineries. “There will be additional supplies from other major oil producing countries. Indian refineries are fully prepared to meet the national demand for petrol, diesel & other petroleum products,”
  • Ratings agency ICRA has estimated that stopping oil imports from Iran could cost Indian refineries as much as ₹2,500 crore.

China ‘can’t and won’t back down’

  • China is Iran’s largest crude oil customer, with total imports last year of approximately 29.3 million tons or about 585,400 bpd, according to customs data sourced by Reuters. That’s roughly 6% of China’s total oil imports.
  • China’s Foreign Ministry reportedly said it had formally complained to the U.S. over its decision to end waivers on sanctions of Iranian oil imports. Beijing said it was resolutely opposed to the move, adding its energy cooperation with Tehran is lawful and reasonable The dispute over importing Iranian crude adds another fault line to increasingly fraught ties between Washington and Beijing. The world’s two largest economies have been locked in a protracted trade war, souring business and consumer sentiment and battering financial markets.Nonetheless, despite the threat of sanctions and a heightened risk of further complications in the long-running trade conflict, analysts at Eurasia Group said they expect China to continue buying Iranian crude, perhaps as high as several hundred thousand barrels per day, to save face.
  • “We think that China can’t and won’t back down this time and we could easily see an increase of Chinese oil imports from Iran up towards maybe 1 million bpd,” , chief commodities analyst at SEB, said in a research note
  • There will also be an increasing amount of oil exports out of Iran which will go ‘under the sanctions radar’… It will drive Iran closer to China and enable China to settle yet more oil in renminbi,” Schieldrop added.
  • India’s ties with Iran are ‘significant and historic’ New Delhi is the second-largest importer of Iranian oil, after Beijing.
  • “New Delhi will cut imports substantially but probably maintain approximately 100,000 bpd of Iranian imports paid for using a rupee payment system. This is less an energy security decision than a political one.”
  • “In the past several months India has worked hard to significantly diversify its energy sources in preparation for this situation. But India’s ties with Iran are significant and historic, and New Delhi will work hard to maintain some links,” Eurasia Group analysts said.
  • Trump said OPEC kingpin Saudi Arabia and other countries in the Middle East-dominated producer group could “more than make up” for any drop in Iranian oil supplies to global markets now that waivers were set to be removed.
  • In response, the oil-rich kingdom said it would work with other oil producers to provide ample supply and a balanced market.
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