Iran seeks to protect Indian market share from Saudi inroads

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 8 -- Iran continues to supply oil to India, despite receiving no payment for months, in an effort to ward off predatory efforts by Saudi Arabia, according to Mohammad Ali Khatibi, Iran’s governor for the Organization of the Petroleum Exporting Countries.

"It seems that Saudi Arabia's actions in the oil market have the smell of competition," said Khatibi. "They are after securing other producers' [market] shares," he said.

"If Saudi Arabia in its recent moves in the oil market is after political goals then the rules of the game are political and the answer should be a political one too," said Khatibi.

India owes Iran anywhere from $2-4 billion for oil it has imported in the months since India banks blocked transfers of money to the Islamic Republic under pressure from the US, which believes Iran is trying to make nuclear weapons.

Indian buyers pay what they owe Iran into a joint bank account, but Iran cannot access the funds because the Reserve Bank of India ended a regional clearing mechanism in December 2010.

"Customers are paying into this joint account but the account is controlled by the Indian government so the funds can't be transferred," according to Khatibi. Still, there are no plans to cut off the supplies of oil to India.

“Exporting oil to India, one of our traditional and long-term customers, will continue,” said Mohammad Aliabadi, Iran’s caretaker oil minister. “India will solve the problems about the payments for oil exports within the next one or two months,” he said.

Iran was keeping up exports without payment to defend its market share, Khatibi told Iran’s Sharq newspaper, and he accused rival exporter Saudi Arabia of trying to grab more of the global oil market by cutting its prices and increasing output.

Iran supplies India with 400,000 b/d, amounting to 12-14% of its total imports. But Saudi Arabia is the country’s largest provider and Indian refiners bought 3 million bbl of additional oil from the kingdom last month.

Iran’s decision to keep the oil flowing to India may well have taken into consideration that India’s Reliance Industries, one of the country’s largest private refiners, ended their contracts with Iran altogether.

Saudi Arabia and Iran clashed at OPEC’s June 8 meeting in Vienna. Riyadh sought an increase in output from the organization, while Tehran opposed any increased production at all.

Saudi Arabia's Minister of Petroleum and Mineral Resources Ali I. al-Naimi said opponents of the output boost were obstinate, while Khatibi said Riyadh had been overly influenced by US-led consumer country demands for cheaper fuel (OGJ Online, June 8, 2010).

Contact Eric Watkins at

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