India’s Chennai Petroleum will stop processing Iranian crude oil from October to keep its insurance coverage once new sanctions by the United States against Iran go into effect, three sources familiar with the issue said.
Two industry sources also told Reuters Thursday that India will settle payments for Iranian oil using rupees through local banks starting in November as the sanctions will make it difficult to settle trades through European banks.
In May, US President Donald Trump withdrew from a 2015 nuclear accord with Iran and ordered the renewal of US sanctions. Some sanctions took effect from Aug. 6 while those affecting the oil and banking sectors will start from Nov. 4.
Indian insurers do not fall directly under the sanctions, but need to hedge their own risk on the Western reinsurance market, which will not accept Iranian exposure.
Iran’s Naftiran Intertrade Co Ltd, a trading arm for state-owned National Iranian Oil Co, owns a 15.4 percent stake in Chennai Petroleum, which has two refineries with a total combined capacity of 230,000 barrels of oil per day (bpd).
Chennai Petroleum’s reduced demand will further cut India’s imports from Iran to about 10 million tons in October, lower than previous estimates reported by Reuters.
Chennai Petroleum, a subsidiary of the country’s biggest refiner Indian Oil Corp (IOC), has a deal to buy up to 2 million tons, or 40,000 bpd, of oil from Iran in the fiscal year 2018/19.
India, the second biggest crude customer for Iran, may cut its imports from Iran by half to secure a waiver from the US to continue with shipments, people familiar with the matter told Bloomberg in August.
