Chennai Petroleum cancels Iran oil imports

The rupee has depreciated about 12% year-to-date against the US dollar

After the Trump Administration pulled out of the nuclear deal and imposed sanctions, it has also set a November 4 deadline to halt financial transactions with Iran using their currency or to face sanctions. One is how much of Iran's oil China, India, and Europe will buy in October and then in November, when the sanctions kick in.

However, India has been appraising the USA about its energy demand to fuel its economy as well as the importance of Iranian oil.

Chennai Petroleum of India says it will end its imports of Iranian crude oil beginning next month, according to sources quoted by Reuters.

"Iranian oil exports are coming down pretty hard", said Roger Diwan, a veteran oil analyst at consultant IHS Markit Ltd.

The Iranian government's response includes a plan that hadn out electronic vouchers to about ten million underprivileged Iranians to be used for "fair distribution" of rationed essential goods at subsidised prices. The remaining 45 per cent payment was remitted in rupees in accounts Iranian oil companies had with the UCO Bank. In January 2012, Iran agreed to accept India's local currency, the rupee, to settle almost half of its sales to India, it said.

U.S. President Donald Trump has threatened to sign an executive order on November 4 to snap back U.S. sanctions on Iran's energy exports and worldwide financial transactions. India is the second-biggest client of Iran and sources almost one-tenth of its crude supplies from there.

The CRS said some projects that India has pursued in Iran involve not only economic issues but national strategy.

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Stating that these conversations are ongoing, Principal Deputy Secretary of State for South and Central Asia Affairs Alice Wells said: "We are working very hard with our partners so that there are no disruptions in the market and adequate supply is available to substitute for Iranian oil".

Noting that India had hesitated to move forward on that project because of United States opposition to projects that benefit Iran, the CRS said.

India is closely monitoring the development and assessing the implication of the US sanctions, Raveesh Kumar said.

UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the U.S. financial system. During Iran President Hassan Rouhani's visit to India in February 2018, he and India's Prime Minister Narendra Modi signed memoranda outlining future expanded energy cooperation, the report added.

The EU has been discussing with India that it was in the process of coming out with a payment solution as using USA dollars for oil purchase will be restrained post-November 4 when the United States sanctions come into force.

Chennai Petroleum, a subsidiary of the country's biggest refiner Indian Oil Corp (IOC), has a deal to buy up to 2 million tonnes, or 40,000 bpd, of oil from Iran in the fiscal year 2018/19. New Delhi has said that technical configuration of many refiners makes it dependent on Iran. Payment for oil bought in September would be due in November as Iran provides a 60 days credit period.

International Olympic Committee imports oil on behalf of Chennai Petroleum.

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