India will clear its dues worth $6.5 billion for oil imports from Iran in a phased manner by paying cash.
Ahead of Prime Minister Narendra Modi’s visit to Tehran in the third week of this month, officials are engaged in discussions to work out the exact amount payable to Iran, which has sought interest on the accumulated dues. The Persian Gulf nation has said the exchange rate volatility may erode its earnings if the interest is not thrown in.
Indian officials have agreed to the proposal in principle. They are also keen on working out a payment mechanism for the past dues and future transactions as the two sides have scrapped an interim system of payment in rupees following the lifting of western sanctions on Iran earlier this year.
A recurring oil market theme in the past few months has been the speculation that despite its jawboning that it is ready and willing to boost crude production, Iran has had a hard time getting both the funding and the required infrastructure to substantially boost its production to recapture its supply levels last seen before the recent US sanctions. That however appears to be changing fast.
Recall all those tankers we have profiled before on anchor next to the Iran shore?
They have finally started to move.
According to Bloomberg, tankers carrying about 28.8 million barrels of crude, or more than 2 million a day, left the Persian Gulf country’s ports in the first 14 days of April, according to tanker-tracking data. That compares with a rate of about 1.45 million barrels a day in March. As a result, Iran’s crude shipments have soared by more than 600,000 barrels a day this month, adding to the pressure facing producer nations as they prepare to meet in Doha to discuss freezing output to prop up oil prices.
Iran, no longer under sanctions, has ended free shipping of crude oil to India and has terminated a three-year old system of getting paid for half of the oil dues in rupees.
The Persian Gulf nation is now insisting on being paid in Euros for the oil it sells to Indian refiners. It also wants refiners like Essar Oil and Mangalore Refinery and Petrochemicals Ltd (MPRL) to clear nearly $6.5 billion of past dues in Euros, officials said.
Iran had in November 2013 offered free delivery of crude oil to Indian refiners as tough Western sanctions crippled its exports. With shipping lines refusing to transport Iranian crude for fear of being sanctioned, Iran used its shipping line for the delivery and did not charge for transportation.
“National Iranian Oil Company (NIOC) has written to Indian firms saying it will no longer be shipping oil for free,” an official said.
“It will continue to ship the oil in its tankers but will charge a discounted tariff,” he said.
The transportation fee will for now be less than half it takes to ferry oil from Iran.
“May be in future this 50 per cent discount too may go,” he added.
Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast
Oil tankers are caught in a traffic jam near the Iraqi port of Basra, causing delays in loading. According to Reuters, around 30 very large crude carriers (VLCCs) are sitting in the Persian Gulf, and the backlog could cost ship owners more than $75,000 per day. Some could be waiting for weeks to reach the port.
Check out this shocking satellite photo of the tanker traffic jam just off the coast of Iraq.
Iran loaded its first cargo of oil aboard tankers to Europe since international sanctions ended, signaling more supplies will add to the global glut of crude.
A tanker for France’s Total SA was being loaded at Kharg Port while vessels chartered for Chinese and Spanish companies were due to arrive later Sunday, an Iranian oil ministry official said. A tanker hired by a Russian company hadn’t arrived, and was still expected, the official said. The official didn’t identify the companies that had hired the other three tankers and didn’t name the vessels.
Iran released the crews of two small US navy vessels who were taken into custody on Tuesday, saying they strayed into Iran’s waters “unintentionally”.
The elite Revolutionary Guards in a statement on Wednesday said the release of the 10 US sailors – nine men and one woman – came after Iran’s investigations corresponded with the US authorities’ explanation that the high-speed boats had no intention to enter into the country’s waters
“Americans promised not to repeat these mistakes,” the statement of the Guards said.
US officials said the incident happened near Farsi Island in the middle of the Persian Gulf. They said some type of mechanical trouble with one of the boats caused them to drift into Iranian territorial waters near the island, and they were picked up by the Iranian Navy.
Bahrain and Oman have increased fuel prices significantly as the Gulf states struggle to rein in budget deficits and ease pressure on government coffers ravaged by the decline in oil prices.
The two poorer members of the six-strong Gulf Co-operation Council followed the example of the United Arab Emirates and Saudi Arabia in cutting subsidies and spending while looking at ways to boost non-oil revenues.
Bahrain, which last year ended state subsidies on meat, announced that regular petrol would rise on Tuesday by 56.3 per cent to 0.125 Bahraini dinars (33 US cents) per litre and premium petrol would increase by 60 per cent to BD 0.160.
Oman said it would raise regular petrol by 23 per cent to 0.140 Omani riyals (36 US cents,) premium petrol by a third to OR 0.160 and diesel by 10 per cent to OR 0.160. The Omani price increase comes into effect on January 15 and will be reviewed monthly. The reform, which includes spending cuts, was endorsed by cabinet in Muscat last month.
Bahrain needs around $125 a barrel to balance its budget, while Oman’s fiscal break-even price is around $110 a barrel.
Two United States Navy boats have been taken into Iranian custody, the Pentagon said Tuesday.
A defense official initially told the Washington Free Beacon that Iran informed the U.S. that the crew would be “promptly” returned. However, ABC News later reported that Iran will hold the two boats overnight and will allow them to resume voyage at daylight, according to a senior defense official.
The defense official who spoke to the Free Beacon declined to say whether any representatives of the U.S. government have spoken with the detained sailors.
“Earlier today, we lost contact with two small U.S. naval craft en route from Kuwait to Bahrain. We subsequently have been in communication with Iranian authorities, who have informed us of the safety and well-being of our personnel. We have received assurances the 10 sailors will promptly be allowed to continue their journey,” the defense official said.
Fars News, a semi-official Iranian news agency, reported that the sailors are being held by the Islamic Revolutionary Guard Corps. Fars also reported that Iran is claiming that the sailors entered 2 kilometers into its territory, breaching its waters.
The IRGC Navy Public Relations spokesman issued a statement confirming the “arrest” of “10 armed” American personnel who breached Iranian territorial waters near the island of Farsi in the Persian Gulf and were then transferred there, according to an independent translation of Sepah News, the official news agency of the IRGC, provided to the Free Beacon. The spokesman further stated that the aircraft carrier USS Harry S. Truman was present southeast of the island in international waters when the arrest was made.
An expert from Italy’s Institute of International Affairs told Sputnik that the removal of sanctions against Iran’s energy exports will have a great impact on the global energy market, and may even alter the nature of OPEC.
Iran’s entry into the global energy market will enable the world’s consumers to reduce their reliance on carbon energy, and transition to supplies of cleaner gas in the drive towards a low-carbon economy, Nicolo Sartori, a Senior Research fellow in the Energy Program at the Istituto Affari Internazionali, told Radio Sputnik on Tuesday.
Russia and Iran are the two countries in the world with the most gas resources, and their cooperation in tapping into those resources will be an important step towards meeting the world’s energy needs after sanctions are fully lifted, said Sartori.
“Getting closer will be very important for Russia, first of all to be a partner in some of Iran’s projects, in particular in LNG, where Russia is not as strong as it could be, and where Iran is expected to become very strong.”
“To an extent, the two countries are quite complementary in terms of exports. Russia is a pipeline-oriented country, looking to its west, to Europe. Iran is going to possibly become an LNG country, looking eastward, to Asia, and possibly competing with the Qataris,” said Sartori, who expects Russia to remain Europe’s key energy supplier.