India will continue to purchase Iranian crude oil, despite the sanctions from the United States. According to a report from Reuters, the announcement was made by Iranian foreign minister Mohammad Javad Zarif shortly after meeting with Indian diplomat Sushma Swaraj.
“Our Indian friends have always been categorical in terms of their intention to continue economic cooperation and (the) import of oil from Iran. And I heard the same statement from my Indian counterpart,” Zarif told reporters in New York, where diplomats from across the globe are currently meeting for the United Nation General Assembly. “We have comprehensive cooperation with India and that comprehensive cooperation also includes energy cooperation because Iran has always been a reliable source of energy for India.”
The Iranians are counting on support from New Delhi, as India is Iran’s second largest importer of oil. Iran has sweetened the deal by shipping the oil to India nearly at cost. Currently, Iran is India’s third-largest provider of crude oil.
The two countries are linked by more than just cooperation of energy deals, however. According to Business Standard, India recently backed the construction and operation of a large port complex in Chabahar. The port is a crucial component of an ambitious plan by both nations to increase trade into Afghanistan.
“Chabahar is operational right now. Indian shipments to Afghanistan have already gone through Chabahar. We expect Chabahar to become even larger with more capacity. We hope India and other investors would come to Chabahar and invest for the expansion of the port facility,” said Zarif while speaking to reporters.
Despite the announcement, oil prices climbed on Thursday, driven by concerns that the upcoming sanctions will affect the global supply of crude. President Trump has asked the Organization of the Petroleum Exporting Countries (OPEC) to increase production to make up for the shortfall.
“The market continues to move higher on fears that the loss of Iranian exports is not going to be made up,” said Tradition Energy’s director of market research Gene McGillian.
Saudi Arabia is expected to boost its oil output to keep prices down. Next year, however, Saudi Arabia predicts it will need to cut production, as the U.S. is projected to add close to 2.4 million barrels per day more to the market. The increase in U.S. production combined with the boosted OPEC supply would create a massive surplus. Compounding the problem is the expectation that demand for oil will decrease in 2019.
The relationship between India and Iran is broader than just trading partners. According to a report from the Economic Times, earlier this week Indian National Security Advisor Ajit Doval met with his Iranian counterparts in Tehran. Diplomats from Afghanistan, China, and Russia also attended the meeting, which was primarily focused on addressing security threats in the region.