Iran threatens to cut India exports

The Iranian government has threatened to cut off oil exports to India by August if India does not make payments of over $2 billion for oil it has already received from Iran. The National Iranian Oil Company (NIOC) made the warning in a letter sent to Indian refineries that had been purchasing Iranian crude on credit.

The controversy began late last year when the Reserve Bank of India stopped using the Asia Clearing Union (ACU) to settle Indian payments to Iran because of ACU's non-adherence to US and EU sanctions. Ever since, India and Iran have examined alternative payment mechanisms, with no apparent success.

Fars News Agency later questioned the authenticity of the news, referring to an unnamed informed source at the Ministry of Petroleum who blamed foreign media for releasing reports based on what they have heard. This is while two Iranian industry officials confirmed sending a letter to Indian refiners.

Iran's threat comes at a time when the Saudis are significantly increasing their oil production and exports. Saudi Arabia, which is India's largest supplier of oil, has already offered India an extra 2.5 million barrels of crude to replace any loss of Iranian imports.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2011 Menas Associates