US-Iran Crude Oil Sanctions A Ray Of Hope For Indian Carmakers

It was since September 2018 that Indian Refiners cut their monthly crude loading from Iran by nearly half when compared to the first half of this year. This was done to help India win waivers on the oil export sanctions which the US plans to reimpose on Iran from November. The United States is renewing sanctions on Iran after withdrawing from a nuclear deal forged in 2015 between Tehran and world powers. The policy decision has come at a time when India is facing a drastic increase in the fuel prices and the step favours at least not to increase that burden.

India which is Iran's No.2 oil client behind top buyer China, dropped its imports to less than 12 million barrels each, after purchases over April-August had been boosted in anticipation of the reductions. India's oil ministry in June told refiners to prepare for a 'drastic reduction or zero' imports from Iran from November 2018. 

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The Indian government is already facing issues over a falling rupee and fuel prices too which have reached a record high in just under a year. India clearly would not want to hold back on imports from Iran as the latter offers a discount on oil sales to the country. But if Washington adopts a tough line, India would have no other choice than to end imports from Iran. However, there is a silver lining. 

The U.S. government has agreed to let eight countries, including close allies South Korea and Japan, as well as India, keep buying Iranian oil after it reimposes sanctions on Tehran. Bloomberg reported that close U.S. allies South Korea and Japan had received waivers along with India, which relies heavily on supplies from Iran. A list of all countries getting waivers is expected to be released officially on Monday.

Speaking to carandbike, R C Bhargava, Chairman- Maruti Suzuki said, "It's a big win situation for India and for the efforts made by the government and I think our relationship with the US government has made this happen. It's something that will help keeping the price of crude oil under control. The global prices would have gone up higher if Iran was totally embargoed for oil, it would certainly have led to an increase in the fuel prices. For the country's economy it is a major positive thing to happen."

Speaking to carandbike Dr. Rajan Wadhera, President - Automotive Sector & Member of the Group Executive Board ,Mahindra & Mahindra said, "I do not want to belittle anyone or otherwise. More efficient trucks that we produce add to the energy security of the country. To that extent we have to pay much lesser dollars for importing oil. This definitely is a step in the right direction. We are going to use lesser fuel for the same load that we're going to carry. So it couldn't have come at a better time. We are at a time when fuel price has gone up by 27% in the last one year, while the freight correction is only 7%. This is basically a loss of margins of businessman and the customers that we have."

The carandbike team also reached out to other carmakers such as Tata Motors and Mercedes-Benz India who denied to comment on the development while Ford India, Honda Cars India, Audi India and BMW India are yet to respond.