Imports from Iran have been affected due to sanctions by the U.S. and European Union

With crude oil imports from Iran, due to sanctions imposed by the U.S. and the European Union, taking a hit in the last year, Iraq has assured India that it would compensate the country’s shortfall due to decline in oil supplies from Iran.

Interestingly, Iraq has already emerged as the second leading crude oil exporter to India, walking ahead of Iran. “The assurance from Iran was conveyed recently to India’s Minister of External Affairs Salman Khurshid by the Iraqi Prime Minister Nuri-al-Maliki and Mr. Khurshid’s counterpart Hoshyar Zebari during his visit to Baghdad last week. Iraq was to expand relationship with India and has also conveyed its keenness to work with the oil and gas companies of India, both in the private and public sector, in the future,” a senior official of the Petroleum Ministry said.

Presently, India is importing around $20 billion worth of crude oil from Iraq and this is bound to go up in the coming months. Saudi Arabia, however, still remains the largest exporter of crude oil to India.

The focus of the visit also was on enhancing economic relations with the oil-rich country as Indian exports to Iraq are hardly within $1 billion. Officials in the Petroleum Ministry said they were looking at a strategic partnership with Iraq. Not only did they want the Indian refiners to enhance their crude oil import engagement with Baghdad, but also explore the possibility of acquiring oil and gas assets by Oil and Natural Gas Corporation Videsh Limited and Oil India Limited.

Interestingly, Mr. Khurshid’s visit to Iraq was the first for a senior Indian Minister in more than two decades. In 1990, then India’s External Affairs Minister I.K. Gujral had visited Iraq to help evacuate the Indian nationals due to the outbreak of the Gulf War.

In April this year, the Iraq Embassy here had conveyed to the Petroleum and Natural Gas Minister that Iraq’s Minister of Oil, Abdul Kareem Lualbi, had agreed to increase crude oil exports to India to meet its requirements.

India has been slowing down its imports from Iran and has looking for new partners. State-owned refiners have cut their sourcing from Iran by almost 10-12 per cent. Till 2012 Iran was India’s second biggest crude oil supplier, catering to about 12 per cent of the country’s needs. However, of late, it has been replaced by Iraq, with domestic refiners such as Hindustan Petroleum Corporation Limited, Mangalore Refinery and Petrochemicals Limited and private sector refiner Essar Oil having cut sourcing from Iran. Indian Oil Corporation and Reliance Industries Limited have also shifted their sourcing from Iran to Iraq.

Indian refiners imported 171.41 million tonnes of crude oil in 2011-12. Of this, 32.63 million tonnes came from Saudi Arabia, 24.51 million tonnes from Iraq, 17.67 million tonnes from Kuwait, and 15.79 million tonnes from the U.A.E. India imported 2,71,200 oil barrels per day (bpd) from Iran between April and February 2012-13, which was below the government’s target of 3,10,000 bpd for the fiscal year which ended on March 31. Oil imports from Iran have decreased to around 7.3 per cent in the period from last April to February, as compared to 11 per cent in the previous year.

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