The Iranian government has threatened to cut off oil exports to India by August if India does not make payments of over $2 billion for oil it has already received from Iran. The National Iranian Oil Company (NIOC) made the warning in a letter sent to Indian refineries that had been purchasing Iranian crude on credit [Fars New Agency, 2 July].
The controversy over India’s payment to Iran began late last year when the Reserve Bank of India stopped using Asia Clearing Union (ACU) to settle Indian payments to Iran because of ACU’s non-adherence to US and EU sanctions. Ever since, India and Iran have examined alternative payment mechanisms, with no apparent success.
Iran would have serious difficulty in following its threat and drop India as an oil client by August. India is Iran’s second largest buyer of crude oil and the move would come at a time when the Saudis are significantly increasing their oil production and exports. Saudi Arabia is India’s largest supplier of oil and has already offered India an extra 2.5 million barrels of crude to replace any loss of Iranian imports.