Monday, May 07, 2012

India's Iran oil imports and US persuasion

Hillary Clinton, the U.S. secretary of state, is on a visit to India, her last one before the term of this government ends. The Hindu reports the following about one of the points on the agenda of her visit
In the run-up to the Indian leg of her visit, agencies have reported an official of her delegation as saying Ms. Clinton will once again persuade Indian leaders to cut down their dependence on Iranian oil. The official noted the stepped up Indian purchases of oil from Saudi Arabia which, he believes, means lower procurement of Iranian oil.
She can afford to give advice. Because, as of 2009, USA produces around 9200 bpd of oil. This is out of its consumption of around 18000 bpd. Which means, US domestically produces around 50% of its crude oil requirement. Moreover, their natural gas production (as of 2010) is approximately 21500 billion cubic feet (bcf), which is around 87% of their total requirement. Of its imports, the largest contributor is its neighbour, Canada. And the remaining they get from friends like Saudi Arabia and Brazil. Plus, it has loads of shale oil and gas reserves, which if it exploits to the fullest potential can lead to US ceasing oil imports.

On the other hand, as of 2009, India produces 835 bpd of oil domestically. This is barely 28% of our total requirement of 3008 bpd. Which means, we import around 72% of our oil requirement. Moreover, with oil being priced in US Dollars, the US does not take a hit on currency fluctuations. But, we in India, are susceptible to both, fluctuation in crude oil price and currency fluctuations.

Hence, it is important that we tread cautiously on Hillary's demand to reduce imports from Iran. She would be delighted (at least in the media) to see us completely halt imports from Iran. But, we have to be aware of the risks involved. Moreover, we are a sovereign democracy and do have the right to decide on who our trade partners will be. And if we oblige to Hillary's demands, what do we get in return? China will march in and persuade Iran into giving huge discounts on crude oil and won't even care a damn about what US or its European allies have to say. Will Hillary return favour by doing away with the arbitrary rise in rejections of business visas and reducing the visa fees to an acceptable level? Will she promise (and deliver) complete access to technology related to power generation using nuclear energy, which they have been trying to restrict through some back door measures or the other?
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