Iran has threatened to halt oil supplies to India in August as it presses New Delhi to solve a payments dispute that has cast a shadow since December over the two countries' $12 billion annual crude trade. National Iranian Oil Co (NIOC), the state oil firm that supplies around 12 percent of India's oil imports, set the deadline in a letter dated June 27 to Indian refiners.
Sources at the refiners and NIOC told Reuters on Friday. But Iran might be leery of losing market share in its second-biggest customer with Saudi Arabia already offering India up to 2.6 million barrels some 3 percent of the fast-growing Asian giant's imports as extra supplies for July.
"It's just their way of trying to put the ball back in the court of the Indian government so that they make a decision, because they don't want to be left hanging," said Praveen Kumar, head of South Asia oil and gas consulting at FACTS Global Energy. "This is not something that the Iranians would like to do."
Iran, facing increased isolation internationally, and energy-hungry India have been looking to resolve an impasse triggered in December when the Reserve Bank of India ended a regional clearing mechanism under US pressure. "This is the first time they have written a letter to halt supplies, otherwise they were regular. We hope that a decision on a new payment mechanism would be taken by mid-July," a source at state-owned Mangalore Refinery and Petrochemical Ltd (MRPL) said. Two Iranian industry officials confirmed sending a letter to Indian refiners.
"We regret to inform you that NIOC would hardly be in a position to deliver the Iranian crude oil to our partners in India ... in August 2011 unless concrete solutions are worked out for remittances of NIOC's dues," the letter said, according to two sources who have seen it.
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