Waiting in the Wings for Crude Oil: China and India to go on buying sprees, if sanctions against Iran are lifted

Iran oil for India and China

 

With the encouraging indications, both from the US and Iran, about the revival of 2015-nuclear-agreement, the world’s second and third consumers of the crude oil are pinning their hopes on a positive outcome in a matter of weeks, not many months.

Both the US and Iran have shown some flexibility recently, clearly deviating from the rigid stance they maintained, a few months ago.

Iran has been carrying on producing oil, even when the sanctions were in place – and President Trump was in office with the teeth-grinding determination to foil this attempt. The Iranians must have hoped that there would be a new administration in the White House in 2021.

Into April 2021, Iran’s hope to revive its oil exports and ailing economy, battered by years of US-led sanctions, is more intense than ever before; so is the determination of its regional neighbours to cash in on the steady supply of crude, with the proximity to the source in their favour.

There have been reports that China continued to buy Iranian oil despite the sanctions; it will only accelerate in the event of the sanctions against Iran being lifted, as China’s economy is growing again.

India, with its strong traditional ties with Iran, reluctantly observed the US sanctions against Iran. Since it could compensate for the loss in supply from Iran’s regional rival, Saudi Arabia and Iraq, it never became a serious problem.

This year, however, the diplomatic relation between India and the kingdom has become strained over the production cuts of crude oil by the OPEC+ that led to a steep rise in petroleum products at the pumps in India.

India’s repeated pleas for the reversal of production cuts fell on deaf ears and the disagreement turned into an unpleasant spat between the two; India even threatened to search for alternative sources for its supply.

True to its threats, it did buy crude oil from alternative sources: the US and Guyana came to the fore; the US even became the second biggest exporter of crude oil to India; oil exports from Saudi Arabia, meanwhile, fell by 34% in February.

Saudis did not take threats lightly either; they increase the price of crude oil for Asia in April, causing significant collateral damage.

Indian media, meanwhile, reports that Indian refineries are preparing themselves for buying crude oil from Iran as soon as the sanctions against Iran are lifted.

Judging by the scale of preparations, if the sanctions are lifted, both India and China will be on unprecedented buying spree. This dynamism will certainly change the politics in the region in a dramatic way, perhaps, compelling Saudi Arabia to fight for its corner.

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