Saudi Arabia has struck a deal to sell three million barrels of oil to India, filling a void left by Iran after it cut supplies due to a payment dispute, according to a Reuters report.
A Saudi government advisor has told Reuters that the Kingdom was not looking to seize Iran’s market share, but neither would it look the other way.
“If Iran can’t get the [payment] issues resolved with India we will send them supplies and we have already alerted them to that,” the advisor said.
Opposition led by Iran at an Organisation of Petroleum Exporting Countries meeting in June defeated a Saudi proposal for a coordinated supply.
Iran cut sales for August to pressure Indian refiners into settling $5 billion in debts for oil supplied, after New Delhi failed to find a way around US and UN sanctions that make financing deals with Tehran difficult, Reuters said.
At stake is 400,000 barrels per day of oil, equal to 12% of India’s total demand of 3.46 million barrels per day.
Saudi Arabia approved sales of 3 million barrels for August, sources with direct knowledge of the deal told Reuters, covering a quarter of Iran’s daily exports to India.
Sources at Indian refiners Hindustan Petroleum, Bharat Petroleum and Essar Oil said that state oil giant Aramco had confirmed it would supply each of them with an additional 1 million barrels of crude in August.
Indian buyers reached out to Saudi Aramco last week to request additional oil to plug the gap from Iran, giving Riyadh an opportunity to grab a bigger share of the market in Asia’s third-largest oil consumer.
“(Saudi) Aramco has confirmed the supply of additional volumes to Indian refiners,” one of the sources said.
“One million barrels each to Bharat Petroleum, Essar and Hindustan Petroleum. It is a mix of Arab light, Arab Heavy and Arab Medium.”
Indian refiners have also sought additional barrels for August from Iraq, Kuwait and the United Arab Emirates.
Facts Global Energy analyst Praveen Kumar said the purchase decision sent a strong message to Iran that India could diversify if the need arose.
It came after Indian oil minister S Jaipal Reddy said on 21 July that India had a back-up plan to cope with a halt to crude supplies from Iran, Reuters reported.
India and Iran have struggled since December to find ways for New Delhi to pay for imports, after India’s central bank stopped payments through the Asian Clearing Union mechanism. There is no ban against buying Iranian crude, but sanctions have made financing trade with Iran tough.
The US and its allies aim to isolate Iran to halt its nuclear programme, which they say is to develop weapons. Iran says it needs nuclear power supplies, Reuters reported.
