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Amid the ongoing Middle East crisis that has disrupted the global oil supply chain, Indian refiners made their first purchase in seven years since 2019, according to Reuters.India has not received any shipment from Tehran since the United States pressured it to stop imports of crude oil, according to the Oil Ministry. This represents the latest development in a major shift in sourcing strategy.
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India buys Iranian oil after 7 years, without reporting any payment hurdles
Indian refiners have bought Iranian oil amid the escalating conflict in West Asia that has disrupted supplies through the Strait of Hormuz. India, the world’s third-largest oil importer and consumer, has not received a single shipment from Iran since May 2019 after US sanctions halted trade.However, recent unrest linked to the ongoing US-Israel conflict has tightened global supplies, impacting India’s energy security.“Amid supply disruptions in the Middle East, Indian refiners have secured their crude oil needs, including from Iran; there is no hurdle in paying for Iranian crude imports,” the ministry said in a statement.The ministry also confirmed that India’s crude oil needs for the coming months remain fully guaranteed.
No payment issues, offer fully guaranteed: Govt
The government rejected reports that an Iranian oil shipment bound for India was diverted to China due to payment hurdles, terming the allegations “factually incorrect.”Clarifying the situation, the ministry said: “News reports and social media posts talking about the diversion of an Iranian crude shipment from Vadinar, India, to China due to ‘payment problems’ are factually incorrect.”
The ministry added that Indian companies enjoy complete flexibility in obtaining crude oil.India imports crude oil from more than 40 countries, and companies have complete flexibility to source oil from different sources and geographies based on commercial considerations.
Why did India stop buying Iranian oil?
Before sanctions were tightened in 2018, India was among the largest buyers of Iranian crude, importing light and heavy grades from Iran due to refinery alignment and favorable pricing terms.At its peak, Iranian crude oil accounted for about 11.5 percent of India’s total imports.
In 2018, India imported approximately 518,000 barrels per day of Iranian oil.But imports fell to about 268,000 barrels per day between January and May 2019 during the sanctions exemption period, before falling to zero after the United States ended the exemptions and reimposed restrictions.Since then, India has diversified its sourcing basket, turning to suppliers in the Middle East, the United States, and more recently Russia.The exemption is expected to remain in place until April 19, with an estimated 95 million barrels of Iranian oil currently stored on ships at sea.Besides crude oil, India also received Iranian LPG.The ministry confirmed that a ship carrying about 44,000 metric tons of Iranian LPG docked at the western port of Mangalore on April 2 and is currently unloading the fuel.
What could waiving US sanctions mean for India?
India has not bought Iranian crude since mid-2019 after the United States withdrew sanctions exemptions.
However, the current crisis has refocused on the possibility of providing limited relief.Nearly 35-40 per cent of India’s crude oil imports pass through the Strait of Hormuz, a route now disrupted by the ongoing conflict. This has increased the urgency for India to secure alternative and reliable supplies.To make up for the potential shortfall, India has increased its purchases of Russian crude. According to Kpler, the country bought nearly 30 million barrels of Russian oil in one week after the conflict escalated.If the United States allows limited “unlicensed” trade of Iranian oil at sea, it could provide India with a critical source of supply.Energy experts point out that India could quickly increase its imports. Sumit Retulia, Senior Research Analyst at Kpler, highlighted that India has historically been a major buyer due to its strong alignment with refiners and favorable trade terms.Speculation about sanctions relief has reintroduced Iran as a key variable in global oil flows, he said, adding that India may emerge as a major demand hub alongside China and other Asian buyers.“India could emerge as a key demand hub to watch, along with Chinese buyers (state-owned enterprises and large independents) and other Asian countries,” he said.