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India refuses government guarantee on Syria oil imports

Source: Reuters 3/3/2012, Location: Middle East

India has refused to provide its sovereign guarantee for oil imports from Syria, two government sources said, frustrating refiners looking for alternative sources of crude to hedge against possible supply disruptions from sanctions-hit Iran.

The Oil Ministry had hoped that the government would underwrite Syrian oil cargoes after Indian insurance firms failed to find re-insurers for shipments from the Middle East nation, which is also targeted by Western sanctions. New Delhi's stand on Syrian oil comes after it voted last month in favor of a U.N. resolution endorsing an Arab League plan calling on Syrian President Bashar al-Assad to step down.

"This is true that the government has denied sovereign guarantee for import of Syrian oil. This was done because of India's vote against Syria in the United Nations," said one of the sources.

Both sources had direct knowledge of the decision and declined to be named because of the sensitivity of the matter.

Indian refiner Hindustan Petroleum Corp and explorer Oil and Natural Gas Corp, which has a stake in Syrian fields, wanted to import oil from Syria but insurance problems halted their plans.

HPCL had even engaged the Shipping Corp of India to hire a vessel to import Syrian crude.

The India government is now weighing options, including extending sovereign guarantees for its shipping lines and buying Iranian oil on a delivered basis to ensure cargoes from July.

Iran is India's second-largest crude oil supplier, meeting about 11 percent of the South Asian country's imports. Tehran is facing Western sanctions over its nuclear plans that many say is aimed at making a bomb. Iran says it wants to produce power.

The sanctions have made it difficult for its Asian customers to pay for oil imports. India currently pays Iran for its imports through a bank in Turkey but that conduit is vulnerable to Western sanctions. India currently does not buy any crude oil from Syria.

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