India’s Oil Trade and Iran sanctions

India’s Oil Trade and Iran sanctions

How important are the oil resources in India and how important is oil trade?  The answer could be understood by looking at some of the facts. India is world’s fourth largest crude oil consumer. However, India’s oil reserves meet only 25% of the country’s domestic oil demand and hence it imports almost 70% of its total consumption.The maximum quantities of imports in India are that of oil and other petroleum products . Crude oil plays a vital role in the country’s economic growth as empirical studies show that the oil sector can cause other non-oil sectors to grow.

Saudi Arabia, Iran, Nigeria, Iraq, Kuwait, UAE, Malaysia and Yemen are amongst the few countries India imports its oil from. Iran used to be India’s second-largest crude oil supplier however the US and European sanctions have reduced the crude oil imports from Iran. India’s oil imports from Iran have decreased by considerably and it is now the fifth-largest crude oil supplier to India.

Sanctions on Iran came into force in 2002 after Iran’s nuclear program became public and it was expected that these would severely affect oil prices in India. Now is this really so?

To answer this we must first understand the Iran sanctions.

As the International Atomic Energy Agency (IAEA) had been unable to confirm Tehran’s assertions that its nuclear activities are exclusively for peaceful purposes and that it has not sought to develop nuclear weapons the United Nations Security Council had adopted six resolutions since 2006 requiring Iran to stop enriching uranium – which can be used for civilian purposes, but also to build nuclear bombs and co-operate with the IAEA. However recently under the agreement reached in Geneva, Iran has committed to halt enrichment above five per cent, halt progress on its enrichment capacity and to halt progress on its plutonium track after which some of the sanctions were lifted. Does this mean good news for India? No it doesn’t as deal this did not bring any respite for India as it has to continue reducing its oil imports from Iran.

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