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.
Not a moment too soon. Why should Iran sell this precious resource to an ungrateful country on credit? If India wants to act like a poodle in the international arena, then she should be made to suffer the consequences.
As regards Saudi Arabia increasing its daily output in order to further harm Iran, I don't think it is technically feasible. Saudi Arabia already extracts the maximum oil that it can. Pushing the production even higher necessitates the use of expensive techniques, making it not viable economically.It is just a bluff.
Nader jan, it was always a mystery to me why India (compared to Iran) always get such a good press in the western media, given her numerous social problems such as the abject gruelling poverty of a very large segment of her population, the suicides every year of thousands of indebted peasants, her cruel caste system, her repression of Kashmiri people and so on, so forth? But not any more.
In reply to a question in an interview with the writer Miss Arundhati Roy (of The God of Small Things' fame), she said: “I have been told quite openly by several correspondents of international newspapers, that they have instructions – ‘No negative news from India’ – because it’s an investment destination. So you don’t hear about it. But there is an insurrection, and it’s not just a Maoist insurrection. Everywhere in the country, people are fighting.”
I hope this story is not true..But if it is, India should look back in recent history at US poodles and their fate. India is a country too large to play with their economy in this cat-and-mouse political nonsense between Iran & US. They should be bold enough to tell the US to stuff it as the Chinese and Russian do every now and then.
In the end they have a lot more to loose than Iran. India is basically Mumbai and Bangalore and that's it. Anything beyond that is a different story all together. More than half of their population still live in abject poverty and it'll only take a little spark for the who country to explode into a revolution - not there yet though but not far off either. They should know that promises from Saudi Arabia for cheaper oil is just that - promises! They've pretty much reached their peak oil and can't produce any more than they can pump at this moment.
Iran should try harder to gradually reduce reliance on oil based income and switch to other means of boosting their economy. From IT, manufacturing etc. It CAN be done!!
This is the reason India will never be a China.
It is basically a third-world colonial mentality plagued by unethical business practices and corruption. Indians have this Jewish type practice of nickel and diming other nations to death and by seeking discounts and then not paying the bill. Anyone who has tried to do business in India will recognize the bizarre practices of Indian government and business. They promise a lot and never deliver. India has already backstabbed Iran thrice at the UNSC on the nuclear issue.
Iran should simply turn-off the tap and improve relations with Pakistan and try to penetrate that market like it has successfully done with Turkey, Afghanistan and Iraq. Good economic relations with Pakistan, another lucrative market of 200 million will also make strategic sense as there is growing anti-Americanism in Pakistan and it is moving completely towards China, which is Iran's largest trading partner as well.
India is heading towards major problems, as well as starvation. It is hardly in a position to pay its bills. There are more poor and starving in India than all of Africa combined. India will have more than 1.5 billion people packed like rats in a landmass slightly bigger than Iran by 2020. Strengthening Pakistan as a buffer also makes perfect military sense.
Even Nadir Shah and later Qajars was well aware of this as his punitive raids in India were designed to keep Baluchistan and Sind (current Pakistan) as buffer agianst the Indians as well as later Brits. Mohammed Reza also intervened in Pakistani Baluchistan in 1973-1977 with Iranian Special Forces, Cobras and Chinooks for this very reason.
Nothing good has ever come out of India.
"Iran would have serious difficulty in following its threat and drop India as an oil client by August"
Do you even think about what you write and examine if it makes sense? You claim India owes $2B to Iran. Iran has been providing oil on credit and has threatened to stop doing so and you claim Iran would have serious difficulty doing this?! So Iran is going to supply India with oil for free forever because a non-paying customer is difficult to drop? Have you ever done business? You work with a non-paying customer for a while but beyond a certain point the customer is not at all difficult to drop. In fact it is absolutely necessary to drop.
Anon 2:52 AM,
India does owe more than $2 billion and I ran will sooner than later, probably on 1 August, will stop shipment of oil to India if no arrangements between the two countries are reached. Notwithstanding this fact, dropping India as the second largest customer is an extremely difficult decision, especially at a time that Saudis are expected to fill in the gap in India's needs. If Iran is forced to take the step, it would be certainly hurtful.
The issue here is not India and Iranian-Indian relations. This problem could occurred with other oil customers as well, and it is problematic for Iran. Unless it sell 100% of its oil to China, which would bring another problem: when countries know you depend on them, and must sell your product to them, they will, sooner or later, dicatate the terms.
Saudi Arabia has virtually no excess capacity. The claim that it could somehow conjure 2.5 million barrels (what is this, per month,per week? I assume it can't possibly be per day) out of thin air is incorrect. Note that recently when it pledged to make up for the drop in Libyan oil production its own production actually DROPPED by more than 800,000 barrels per day rather than rising. It is always important to treat Saudi claims that they can increase oil exports at the drop of a hat with extreme skepticism until proven otherwise.
Anon @ 3.37 PM July 3,
I completely concur with your assertion that Saudi Arabia lacks the access capacity that it claims to have.
As someone with a background in petroleum geology, I can tell you with confidence that it is even difficult for that country to sustain its current level of production on a daily basis let alone to increase it by a further 20 to 25%. As I said in my earlier post (anon @ 2.08 PM, July 2), it's just a bluff.
Actually, I agree with the realistic and technically sound assessments by Anon @ 3.37 PM July 3, and anon July 3, 2011 4:53 PM.
Saudi Arabia is bluffing as usual. They have huge infrastructre issues in terms of ramping up production by a massive 25% overnight. Secondly, the corrupt House of Saud is in survival mode as socio-economic pressure mounts, along with a restless youth, (women wanting to drive and the Asian maids refusing to be raped) and the screams of color-coded "Arab Spring" hollering at the doors. Oil prices are set for a major spike by the end of Northern summer as demand picks up in Asia. The loss of Libyan oil of around one million barrels a day has not been made up as the Anglo-French supported puppet "revolutionaries" in Benghazi, who have barely been able to export 100,000 barrels of low sulphur Libyan crude through Qatar.
There was a good analysis by Robert Tait in Asia Times on the hollow Saudi oil threats to Iran.
A Saudi Arabian plan to cripple Iran's economy by manipulating oil prices - forcing Tehran to halt its nuclear program - was last week touted by Prince Turki al-Faisal. However, Riyadh knows Iran could undercut competitors and continue nuclear activities amid such pressure - as well as sabotage oil pipelines and tankers - making the plan seem more psychological warfare than a genuine threat. - Robert Tait
India be advised to never forget that Saudi Arabia will way earlier run out of oil than Iran. And India should also take into account its vital interests in Iranian gas supply, a resource on which India will heavily be competing with China in the future.
Sooner or later, the Indian sluggishness in payments will backfire.
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