Amid continued challenges to its economic recovery, Iran has scored a symbolic victory, overtaking Saudi Arabia as India’s top supplier of crude oil.
Iran has historically been the second-largest supplier but fell to third behind Iraq amid stringent US and European sanctions in 2012 that cut Tehran’s exports by up to 60%.
Since January’s implementation of the July 2015 nuclear deal, the Islamic Republic has recovered much of its pre-2012 output and sales. Production is now about 3.6 million barrels per day and exports just under 2 million bpd.
In October, India’s purchases from Iran rose more than 200% compared with the same month in 2015, rising to 789,000 bpd.
Saudi Arabia supplied 697,000 bpd last month. From January to October, Riyadh has shipped 830,000 bpd compared to Iraq’s 784,000 bpd and Iran’s 456,400 bpd.
The shift in October is due partly to less availability from Saudi Arabia, which has increased its capacity to refine oil instead of just exporting more crude. Iran is offering price discounts, which India used to build up its strategic petroleum reserves.
Iran faces imminent challenges to any expansion of production and exports.
Amid a continued low global price — now about $45, compared to a high of $115 in 2014 — OPEC members are considering a freeze on output. Tehran is pursuing an exemption, while maintaining that others should cut their production.
A longer-term issue is the necessary investment to develop oil and gas fields. Negotiations with foreign companies have been pursued for months over a new Iran Petroleum Contract. However, completion is still awaited, amid both disputes over details of the IPC and internal opposition from groups such as the Revolutionary Guards.
All foreign investment withdrew from Iran’s fields by 2010, with Russian and Chinese firms the last to leave.