India's energy ties with Iran unsettle Washington

While Iranian-Indian trade ties continue to deepen, with Indian-based Consul General of Iran Hassan Nourian predicting that bilateral trade between India and Iran will be worth $25 billion by 2017, India is hedging its bets about energy imports, and where to make up the shortfall from the increased sanctions regime.

…and what better place to look than the Middle East's rising petro-state, Iraq?

India's External Affairs Minister Salman Khurshid is heading for Baghdad for a two-day visit beginning June 19.

Top of the agenda?

Oil — Iraq is now India's second largest supplier of oil after Saudi Arabia, having replaced Iran and become a “critical partner” of India.

It is a potential marriage made in heaven. Iraq needs an assured market for its increasing crude production, having set itself a production target of 7 million bpd from its current 3 million bpd, while India is in search of a long-term partnership with a major oil producer.

While such deepening ties will thrill Washington as much as they distress Iran, there is still a wild card in the Iraqi mix — China, now Iraq's biggest customer, already purchasing nearly half the oil that Iraq produces, almost 1.5 million barrels a day. Worse still for Indian aspirations, China is now trying for an even bigger share, bidding for a stake currently owned by Exxon Mobil in one of Iraq's largest oil fields, West Qurna.

New Delhi's choices are stark — make Washington happy, alienate long-time partner Iran, and keep fingers crossed that Beijing doesn't stitch up any further Iraqi concessions.

Tough call.

About the Author
James Stafford

James Stafford is the London-based editor of Oilprice.com.

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