India has announced its intention to resume oil imports from Iran and Venezuela, as part of its objective to diversify its oil suppliers. Imports from Iran and Venezuela were halted after President Trump imposed sanctions on the two OPEC countries when he came to office in 2017. But President-elect Biden’s new office offers high hopes to countries wanting to resume trade with the oil-rich nations.
Oil minister Dharmendra Pradhan announced on Wednesday, “As a buyer, I would like to have more buying places. I should have more destinations to go for purchasing (oil),”. He hopes resuming trade with Iran and Venezuela will help diversify the country’s oil import sector.
In the financial year 2019-2020, India imported $92.8 billion worth of oil, gas, and petroleum from OPEC members. Diversifying the sources of this importation would help India to cut its high import bill, as the world’s third-largest importer of oil. India currently imports 85 percent of its oil needs, mainly from Iraq and Saudi Arabia.
Before the sanctions, India was the second-largest importer of Iranian oil after China. However, importations halted in May 2019 due to the sanctions imposed by the Trump administration. The country’s imports from Venezuela stopped in June 2020, which was previously India’s fourth-biggest supplier.
Biden has said he wants to move towards diplomacy with Iran once again, signaling to the U.S.-Iran relationship during the Obama Administration. During his election campaign, Biden stated that he would “offer Tehran a credible path back to diplomacy”.
The question now is whether Tehran would accept such an offer, following three years of growing distrust for the USA. Ryan Bohl, Middle East analyst at risk consulting firm Stratfor, believes the U.S. would have to make notable concessions to get a nuclear deal with Iran back on the table.
However, there are high hopes in the region as demand for oil in India is projected to keep increasing over the next two decades, with greater potential for the Asian export market. Energy consumption in India is expected to increase by 3 percent per annum between now and 2040, faster than other major world economies. This could make the country’s energy consumption as high as 11 percent of the global total within the same timeframe.
The slump in India’s oil market following Covid-19 pandemic restrictions seems to be over. We are seeing an increase in demand thanks to India’s festive season as well as businesses reopening. According to Pradhan earlier in November, “India’s energy sector has shown remarkable resilience and our energy demand has almost recovered back to the pre-Covid levels, particularly for petroleum products, due to [the] rejuvenation of economic activities,”.
India’s oil sector bounce back comes as many other countries are still struggling to recover, as further lockdowns are imposed across Europe. While Europe and North America’s oil sector still face uncertain times, Asia provides a safer bet.
When it comes to India, everyone wants a piece of the pie. While other countries are expected to slow down their consumption as more regulations are imposed to shift towards sustainability, India’s energy market does not look set to slow any time soon.