list of foreign firms bowing out of ties with the Islamic Republic. But the decision may be based on Iranian prices and have nothing to do with politics.
Reliance last year halted sales of gasoline to Iran, but it continued to buy crude oil from Iran to feed its main refinery in India, the largest refinery in the world.
Last week, Reuters said two separate sources had told it that Reliance did not renew its crude contract with Iran when it came up for renewal at the start of the year. While it could still buy individual tanker loads of crude and did so in January, the sources said it bought no Iranian oil in either February or March.
American sanctions are not threatened to any firm buying Iranian crude. And many American allies buy Iranian crude without a peep from Washington.
Reuters’ sources suggested the decision might be purely economic and not political. They indicated there was a price dispute between Reliance and Iran and that Reliance has easy access to competing grades and didn’t need Iran. If that was the sole reason for ending the contract, then Reliance could resume purchases of Iranian crude if Iran lowered its price.
Reuters quoted an unnamed source with the National Iranian Oil Co. (NIOC) as confirming that Iran had no 2010 contract with Reliance for crude sales and also saying that the reason was “differences over pricing of the Soroush and Nowruz crudes,” which are heavy, meaning they produce less gasoline, and very sour or sulfurous, meaning they require more expensive refining.
Last year, Reliance bought about 100,000 barrels a day of Iranian crude or about 4 percent of all its exports.
Japan and China are also cutting their purchasers of Iranian crude. Published official statistics show China bought 40 percent less Iranian crude in January and February compared to the same months last year. Japanese sources say that country’s procurement of Iranian crude will fall 11 percent this year to the lowest level in 17 years.
This does not mean Iranian crude will necessarily go unsold. Oil is a fungible product. If India, Japan and China are buying their crude elsewhere, then other buyers will have to shift from elsewhere to Iran. The production estimates for Iran produced by Platt’s, a leading industry publication, show no drop in Iranian output in January or February. In fact, they show a modest increase compared to January and February of last year.
Reliance ceased selling gasoline to Iran last year as Congress moved to approve sanctions on foreign companies selling gasoline to the Islamic Republic. As of now, every major firm selling gasoline to Iran that also does major business in the United States has halted gasoline sales to Iran, leaving the market to companies like Petronas of Malaysia that have no significant business links with the United States.
