

The internal strife in Iraq is causing ripples across global financial markets. India, a net importer of oil, is expected largely to be affected by the crisis.



Here are 5 facts to note on the connection between the Iraq crisis and us:



1. Brent crude oil price in the international market is hovering around $ 115 per barrel. However, India does not import Brent Crude oil alone. It imports oil that is a mix of few types of crude oils. The Indian oil basket, as it is referred to in the financial markets, comprises Oman and Dubai sour grade oils and Brent sweet trade in a proportion of 70:30. The sour grade is cheaper than the Brent sweet crude oil. The Indian crude basket is about $ 112 per barrel of oil. Each barrel of oil equals approximately 159 litres of oil.



2. India imports nearly 80% of the crude oil consumption requirement. This is close to close 20 lakh barrels/day. Iraq is the second largest supplier of crude oil with 10.1% share only after Saudi Arabia (18.1%) in 2013-14.



3. Iraq’s oil facilities are mostly located in the south. The internal strife is in the North of Iraq. The Iraqi government remains in control of large oil fields. “The large Rumaila oil field producing about 15,00,000 barrels per day of oil is also located in the southern region. We thus believe that the fears of a significant impact on India’s current account deficit may be unfounded,” said a note from State Bank of India, the biggest government owned bank.



4. The value of the rupee is directly connected to India's current account deficit(CAD). It is the amount that India’ owes in foreign currency to the world. Usually, high imports are the main reason for the CAD to rise. Any increase in the deficit would lead to rupee-selling and dollar-buying. Worries about the impact of a high oil price on India's CAD caused the rupee to fall to Rs 60.55 per dollar, the lowest since April 29 recently.



5. RBI governor Raghuram Rajan was quick to calm nerves in the market when he said that India was in a much better position to deal with shocks recently. According to the SBI analysis, if the CAD remains below 3% of India’s Gross Domestic Product or GDP, then it is not a reason to worry. “Even if prices move up to $ 115 (the worst case scenario) CAD would still be below 3% of GDP in FY15,” the SBI note said.



























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