While the arrival of President-elect Joe Biden at the White House on January 20 is expected to mark a shift in the US policy with far reaching geopolitical implications, sanctions on Iran may not be lifted “overnight.”
However, Biden is likely to ease the contours of the sanctions, helping Iran in resuming oil supply into the global market. Although this will lead to softening of global crude prices, India may not be able to begin inward shipment of Iranian oil immediately though India has already diversified its oil supply sources.
Iran has been traditionally India's second largest supplier of oil after Saudi Arabia until 2010-11. Though supply of oil is not an issue for India anymore, the lowering of global prices would come as a boon to for reviving the Covid-19 hit economy. Narendra Taneja, international energy expert told IndiaNarrative.com that a few factors including the willingness for insurers to provide the required cover to oil cargoes from Iran and availability of ships will be important.
“Oil imports from Iran may take some time, it depends on how soon the western insurance companies start providing the necessary cover to the oil cargoes. That apart we also need to see how soon the international shipping companies are willing to provide vessels to carry it,” Taneja said. Another analyst on condition of anonymity said that the payment mechanism with cash-starved Iran would also have to be re-chalked.
Reports have suggested that Iran could start pumping in 2 million barrels of oil every day, leading to a further drop in global crude prices. Low global crude oil prices would boost India’s macro-economic indicators, considering it imports over 80 per cent of its oil needs annually. Oil prices are currently hovering at a 9-month high with the benchmark Brent crude ruling at over $51 per barrel.
The third-largest consumer of oil globally, India imported about 10 million tonnes of oil in 2019-20. At a time when the Narendra Modi government is battling an acute slowdown—though recent trends show economic recovery has begun–low global crude oil prices will provide the necessary shot in the arm.
India, which requires about 4.5 million barrels a day, has been trying to reduce its dependence on oil supply from the Organization of the Petroleum Exporting Countries (OPEC). In 2019-20, India imported just over 78 per cent of its total oil requirements from the OPEC as it increased crude oil imports from US.
