Is India weaning itself off Iranian oil fast enough for the US?

India is Iran's No. 1 customer for crude oil, which puts it in danger of running afoul of a new US law that will twist nations' arms to curb oil imports from Iran. India's ambassador to the US cites 'degree of understanding' from US officials to India's predicament.

Monitor Breakfast

India and the United States, the world’s two largest democracies, are trying not to let the issue of Iranian oil imports divide them.

The confrontation springs from the fact that, as of January, India is Iran’s largest customer for crude oil. It gains that rank even as the US is using oil as a means to pressure Iran to end a nuclear program that the West and Israel see as a major proliferation threat. Under new legislation that takes effect June 28, the US can cut off from its financial system countries that do not substantially reduce their reliance on Iranian oil.

India is a net importer of petroleum, and millions of its citizens still live in poverty, needing kerosene for daily survival. “We have 500 million people in India that do not have electricity,” says India’s ambassador to the US, Nirupama Rao. “You can understand the nature of the challenges we face in this regard. So therefore, just overnight cutting off imports from Iran becomes virtually impossible.”

Will India's efforts to reduce reliance on Iranian oil be enough to satisfy the US government? Here's how Ambassador Rao, speaking at a Monitor-sponsored breakfast for reporters on Friday, characterized American officials' response to India's position.

“There is a degree of understanding," said Rao, formerly India's foreign secretary and also its ambassador to China. "It is not a miniscule degree of understanding.” 

Describing ongoing US-India discussions, Rao said, “This has been a very open and transparent engagement, and I think it reflects the maturity of our relationship today. I mean, we are not hurling things at each other here. We are listening to what each side has to say. There is … a level of sensitivity to each other's concerns on such issues." 

Rao said India is indeed curtailing its reliance on Iranian oil. “The share of Iranian imports in our total volume of petroleum imports is going down as we speak, and there has been a significant reduction," she said. "And I see that reduction being even more reinforced in the weeks and months to come.” 

She cited figures showing that Iran accounted for 16.4 percent of India’s imports of crude oil in 2008-09. For 2011-12, Iranian petroleum accounted for 10.3 percent of Indian oil imports. “And that drop is even more perceptible now,” she said, as it becomes increasingly difficult to conduct oil transactions with Iran. 

Iran and six world powers – the US, Russia, China, France, Britain, and Germany -- are slated to meet Saturday for negotiations over Iran's nuclear program, which Tehran says is for peaceful energy purposes but which the West believes has a nuclear weapons component. Negotiators hope to obtain verifiable assurance from Iran that its uranium enrichment program won't be used to fuel a bomb.