India will cut oil imports from Iran by 11%

A week after Secretary of State Hillary Clinton urged New Delhi to reduce its engagement with Tehran, India said it would cut Iranian oil imports by 11 percent in the coming year.

The promised cut could constitute a significant step for India toward securing a waiver from U.S. sanctions before a June deadline — although officials here denied that they were motivated by U.S. pressure and some analysts questioned whether the move would be enough to satisfy Washington.

The United States has already granted sanction waivers to Japan and 10 European countries after they announced cuts, but it has not yet included India or China, two of the biggest importers of Iranian oil.

Deputy oil minister R.P.N. Singh told parliament Tuesday that imports from Iran would be reduced to 113.6 million barrels in the financial year ending next March, down from 127.8 million tons the previous year.

In the past few months, New Delhi has come under enormous pressure from Washington to join international sanctions aimed at forcing Iran to stop its military nuclear program. But India’s historical ties with Iran, and especially its reliance on Iranian oil, have posed a severe foreign policy dilemma here.

Fiercely independent in its foreign policy making, and wary of angering its huge Muslim population, India says it will respect only sanctions agreed to by the United Nations. Officials would never publicly admit that any reduction in oil imports from Iran has come as a result of U.S. pressure.

“In order to reduce its dependence on any particular region of the world, India has been consciously trying to diversify its sources of crude oil imports to strengthen the country’s energy security,” Singh told lawmakers in a written statement Tuesday.

A foreign ministry official sought to play down the announcement by saying that it was dictated by the market conditions.

“The cut is a direct result of constraints faced by financial institutions to channelize payments for Iranian oil,” said a foreign ministry official. “These constraints are bound to have an impact, regardless of what the governments decide. There is no intention on our part to seek a waiver from the U.S.”

India imports 80 percent of its oil, from more than 30 countries. Iran accounts for almost 12 percent of its total imports.

Indian officials privately say that it is difficult to restrain India’s growing appetite for energy, which is desperately needed to fuel industrial expansion and economic growth. But U.S.-led sanctions have already made it much harder for India to ship and pay for Iranian oil.

A U.S. special envoy, Carlos Pascual, met officials in New Delhi on Tuesday to follow up on Clinton’s discussions with Indian officials. The foreign ministry official said the discussion with the envoy was about India’s long-term energy needs and “included the Iran issue, but it was not the primary focus today.”

“We have already scaled back imports because we have been facing difficulties in paying for the oil and having trouble finding enough tankers to lift the oil,” said K. C. Singh, a retired diplomat who was India’s ambassador to Tehran. “Today’s announcement may be okay for the time being, but I suspect that Americans would want us to do more. India has to do a tough balancing act between Iran and America. We have to ensure that our strategic engagement with the U.S. continues.”

Under pressure from the U.S. Treasury, India withdrew in December 2010 from the Asian Clearing Union, a mechanism set up a few years ago to make payments from the South Asian region to Iran. But Iran continued to supply oil on credit, with debts ballooning to $3 billion earlier this year.

In March, Iran agreed to receive part of the payment in Indian rupees, through Indian banks. The option of paying with either dollars or euros has been choked off because of international pressure.

Washington Post