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India and China, two powerful emerging economies have decided to defy European Union and U.S. sanctions on Iran planned to pressurize Tehran into abandoning its nuclear program. At a press conference in Chicago on Sunday, Pranab Mukherjee told reporters that Iran remains one of the strongest contributors to India’s emerging economy and drastically reducing imports from Iran would not be a feasible decision. India and China together account for 34 percent of Iran oil exports, slightly higher than Europe. Although, Iran would be happy with this decision, it waits to be seen how the two countries cope up when it is time to pay, without offending the sanctions. Analysts feel that Iran may have bribed the Asian countries with discounted oil prices to keep them on their side. If China and India were to disobey EU sanctions, Iran is at freewill to sidestep the sanctions and receive foreign capital. It is also assumed that China and India may be whiling away time to check whether they are able to get some attractive discounts from Saudi Arabia who is presently trying to re-position itself as the substitute exporter for Iran. The European Union imposed an oil embargo on Iran, banning all European nations from buying oil from the Mideast country. While Europe froze assets of the Iranian Central Bank, U.S. barred financial institutions from trading with the bank. India and China rely heavily on oil imports to sustain their daily needs. Iran accounts for 9 percent of India’s imports while China depends on Iran for 6 percent of its imports. Iran exports 2.5 million barrels of oil per day of which a majority is sent to China, India, Japan and South Korea. The remaining 500,000 barrels goes to Europe. South Korea has refused to commit to the Iran oil sanctions while China has asked for negotiations. Japan is saying that oil imports from Iran have been already declining over the past few years and will continue to do so. Although India is willing to buy oil from Iran, it may find hard to find banks ready to carry out transactions with the banned country. Presently, Indian is trading via Turkiye Halk Bankasi AS, which also handles payments for oil refiner Tupras. As this route is vulnerable to external pressure, India would have to delve into other modes of payment as well. The Iran oil embargo involve the US and EU suspecting Iran of building nuclear weapons. However, Iran argues that its nuclear facility is for peaceful purposes only. Kyles Humphrey is a knowledgeable writer in oil related fields, who periodically writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
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