Iran Offers India Free Shipping For Oil

Iran’s desperation to boost oil revenues amidst international sanctions has seen it offer free delivery of crude to remaining clients such as India, according to a report by Reuters on Monday.

Iran’s desperation to boost oil revenues amidst international sanctions has seen it offer free delivery of crude to remaining clients such as India, according to a report by Reuters on Monday.

Industry sources told the news agency that Tehran had come up with several incentives, such as free shipping and deep discounts on oil, to increase oil exports; while India too is seeking to reduce its oil import bill as a means to curb foreign exchange outflow amid the already weakened rupee.

The complication however lies in the fact that India’s six-month exemption from U.S. sanctions to import Iranian oil is due for renewal in early December. As such, India may be cautious on importing more oil from Iran so as to meet U.S. stipulations.

According to Reuters, daily imports from Iran have already slid 34 percent in June-September from the six months between December 2012 and May 2013.

Yet Tehran hopes to entice Indian buyers into at least maintaining oil purchases.

[quote]”The more you buy, the more incentives you get. If a refiner buys 30 million barrels of Iranian oil in a year then the discount translates to 25 cents per barrel,” said a Reuters source, who requested anonymity because of the sensitivity of the issue. [/quote]

Free shipping alone could save Indian refiners about $1 per barrel in transportation cost, not counting the additional boost in margins for processing Iranian oil.

Related: India Could Risk US Ire By Importing More Iranian Oil

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According to the Press Times of India, India too may try to leverage on the situation to pay Iran purely in rupees, rather than the current system of rupees and dollars.

In 2010-2011, Iran was India’s second largest supplier of crude oil after Saudi Arabia. From 2012-13 however, the international sanctions meant that Iran only supplied about 13.1 million tonnes of oil to India, lagging behind Saudi Arabia, Iraq, Venezuela, Kuwait and the United Arab Emirates.