Iraq topples Iran, becomes 2nd largest crude oil supplier to India

The pressure of US sanctions on Iran is evident with Indian refiners shifting attention to other crude oil producing nations. Supplies from Iraq and Kuwait have seen a significant increase, even as Saudi Arabia maintained its position as the largest supplier. The sanctions also made payments for supplies from Iran difficult. Indian refiners paid for their Iranian oil imports through Turkey’s Halkbank. But, there is a fear that this system may collapse due to the new US sanctions. A method was also worked out wherein National Iranian Oil Company would accept a share of the payments in rupee in an account opened in UCO Bank. However the 40 per cent withholding tax component made the mechanism a non-starter. Domestic refiners had refused to shoulder the additional tax burden, which made sourcing from Iran very expensive. In the Budget for 2012-13, the Government stepped in to exempt tax on payment received by a foreign company in Indian currency on account of sale of crude oil to any person in India.