19 Feb 2019
The Telegraph reports that Indian Oil Corporation (IOC) signed a deal to purchase 3 million tonnes of crude, amounting to $1.5 billion, from the United States during the next fiscal.
The deal is set to help boost strategic energy cooperation between both countries and decrease the trade deficit.
Although the deal will aid the state-owned refiner to expand its crude sources, analysts expect it will lead to a reduction of oil imports from Iran when the Trump administration reviews the Iran sanction waiver.
“IOC has finalised a term contract to import up to 3 million tonnes (mt) of crude oil of US origin as part of its strategy to diversify term crude sources,” the IOC said.
This marks the first time an Indian refiner has signed an annual contract since the introduction of crude oil imports from the US, which took place in 2017.
Government trade data revealed that oil imports from the US grew by 294% to 4.58mt during the April-December timeframe in 2018, compared with 1.16mt imported in that same period in 2017.
An official said: “The energy trade with the US will result in bringing down America’s trade deficit with us. However, it does not mean that we will stop importing from Iran.”
The US had imposed trade sanctions against Iran but allowed India – and an additional eight countries – to import till the end of April 2019.
Analysts pointed out that the top buyers of Iranian crude, being India and China, may be allowed to continue imports; although certain conditions could be put in place.
India and the US are working to strengthen their trade ties and set up several working groups, comprising of one of energy.
Last month, India’s ambassador to the US had reportedly told the American business leaders that India will buy $5 billion worth of oil this year, and an additional $13 billion worth of defence equipment.