With the US announcing to withdraw waivers granted to eight economies including India to buy crude oil from Iran beginning early May, over-dependence on oil imports in the third largest consumer of oil has again come to limelight.
During the first year in office of prime minister Narendra Modi in 2014-15, India used to import a majority (18.4%) of its total crude oil requirement from Saudi Arab with Iran at a distance 7th position contributing only 6% of India’s crude basket. However, towards end of Modi’s tenure, as per the latest available data for the first 10 months of the financial year 2018-19 (April-January), Iran is now the third largest contributor to India’s energy security, contributing 11.3% of the country’s crude oil demand. A fast normalising Iraq after a long period of war and internal strife has also replaced Saudi Arab as the top source for India’s crude oil demand, contributing a fifth (20.4%) of its oil imports by January this year.
How US ending Iran waivers could affect oil markets and beyond
Sweetener deals including higher discounts, longer credit periods and better insurance and shipping deals by both Iran and Iraq have endeared them to India as reliable oil suppliers at a time Saudi Arab has cut oil production.
In 2014-15, Venezuela was the third largest supplier (12.1%) of crude oil to India. But by January, 2019, it has dropped to fifth position (7.6%) mostly due to pressure from the US to reduce oil imports as it unleashed sanctions on the “illegitimate" regime of President Nicolas Maduro, accusing it of violence and obstructing international humanitarian assistance to the citizens of the country undergoing a socio-economic crisis.
However, the most surprising entry in the top 10 list of oil exporters to India is the United States from where India now sources 2.75% of its total oil requirements till January of 2018-19 financial year. To keep president Donald Trump in good humour who has been accusing India of unfair trade practices, highlighting the trade surplus that India enjoys, India started importing crude oil from the US beginning 2017-18 and increased it more than four times in 2018-19. But that has not stopped Trump from withdrawing zero duty benefits worth $5.6 billion to Indian exporters or ending the waiver from Iran sanctions.