India - Iran oil diplomacy and forex crisis

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Today, we have built up a $6 billion backlog payment and clearing them slowly trying not to disrupt the markets. Recalling the forex crisis of August 2013

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India eyes raising Iranian crude imports to curtail dollar outflows
Mumbai (Platts)--30Aug2013/609 am EDT/1009 GMT
     India is looking at increasing crude oil imports from Iran in an effort
to curtail US dollar outflows as the country struggles to reduce its current
account deficit and arrest the depreciation of the rupee, official sources
said this week.    
     At the same time, India could be looking to settling trades with Iraq in
their respective currencies.         
     Oil minister M. Veerappa Moily told reporters in New Delhi earlier this
week that part of the plan to save $22 billion in the country's oil import
bill was to import crude from Iran which accepts Indian currency.
     The same view was echoed by India's finance minister P. Chidambaram
earlier in August.
     "If India can increase its imports from Iran by 6 million-7 million mt,
it would be positive. So long as the government protects them (Indian
refineries that import Iranian crude) there shouldn't be any problem," said
K. Ravichandran, senior analyst with ratings firm ICRA.
     India has been settling 45% of its crude oil import bill with Iran in
rupees. And in July, Iran agreed to accept outstanding payments that was to
have been settled in euros in the Indian currency also, as payments have been
pending since February.
     The Indian currency had fallen to a record low of Rupees 68.8 to the
dollar on Wednesday, recording a 24% depreciation in the last three months.
     Still, it may not be that easy to step up imports from Iran, a former
oil industry veteran and a retired foreign service official said.
     "How can we go back to old levels of trade or imports with Iran. There
are sanctions, there are payment issues," the former foreign service official
said.
     "You should have had courage of conviction to go and tell the US that
your economy will collapse if Iran imports are stopped. We are only doing
firefighting, not even crisis management," said R.S. Sharma, former chairman
of state-owned Oil and Natural Gas Corp.
     State-owned Hindustan Petroleum Corp. Ltd. for one, has continued to
halt imports due to the issue of insurance coverage to its refineries, even
though fellow state-owned refiner Mangalore Refinery and Petrochemicals Ltd.
has resumed imports by receiving its first cargo this month.
     And HPCL will continue to wait for clarity on insurance before it
resumes crude imports from Iran, company sources said.
     "We have asked for clarification and they are yet to come back. We will
be able to take a decision only after that," HPCL sources said Thursday,
referring to the finance ministry's recent announcement to set up an
insurance fund with a contribution of Rupees 20 billion ($302 million) for
refineries processing Iranian crude.
     But Ravichandran was more optimistic, saying: "Gradually we have reduced
our imports. Their (Iran's) overall exports have also fallen. So we can still
negotiate with them."
     Crude imports from Iran fell 36.4% year on year to 5.87 million mt over
January-June, data from DGCIS (Directorate General of Commercial Intelligence
and Statistics) under the Ministry of Commerce showed.
     And in the last financial year that ended March 2013, India slashed
crude imports from Iran to 13.3 million mt (267,100 b/d) from 18.1 million mt
in the previous year.     
          
     EYES CURRENCY SWAP IN TRADE WITH IRAQ
     Not only is India targeting Iranian imports, the country is looking to
Iraq to settling trades in local currencies, based on a recent statement from
India's commerce minister Anand Sharma.
     Sharma had said the use of currency swap in trades would be discussed
during the visit of Iraqi prime minister Nouri Al-Maliki to India last week.
But to date, no new information has emerged.
     Iraq has displaced Iran as the second top crude supplier with estimated
volumes of 24 million mt in fiscal 2012-2013.
--M.C. Vaijayanthi, newsdesk@platts.com

--Edited by Irene Tang, irene.tang@platts.com

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