Big oil relief soon? What Trump’s possible ‘unsanctioning’ of Iran crude means for India

Will India get access to Iran crude oil soon? The Donald Trump administration has signalled the possibility of waiving sanctions on floating Iran crude oil to ease the ongoing shock in the global energy markets. The US-Israel-Iran war has driven up crude oil prices globally, with Brent crude rising to near $120 per barrel levels.The Trump administration has already issued a similar waiver for Russian crude oil which it had sanctioned to pressure Moscow to end the conflict with Ukraine. US Treasury Secretary Scott Bessent said on Thursday that Washington is considering the possibility of lifting sanctions on Iranian oil cargoes that are already in transit, as energy prices surge amid the ongoing Middle East conflict.His remarks, made during an interview with Fox Business, came as oil and gas markets rallied again following Iran’s strike on Qatar’s largest liquefied natural gas (LNG) facility and its threats to target broader regional energy infrastructure.“In the coming days, we may unsanction the Iranian oil that’s on the water. It’s about 140 million barrels. So depending on how you count it, that’s 10 days to two weeks of supply that the Iranians had been pushing out that would have all gone to China. In essence, we will be using the Iranian barrels against the Iranians to keep the price down for the next 10, or 14 days, as we continue this campaign,” Bessent said.Also Read | How Iran’s strikes on Qatar’s Ras Laffan, world’s largest LNG hub & other Middle East oil & gas infra, will impact India Bessent also indicated that the US could tap additional volumes from its strategic petroleum reserves to help stabilize global oil prices.The US has been working to contain the sharp rise in energy costs after US-Israeli strikes on Iran on February 28 triggered a wider escalation. Iran’s response has effectively disrupted commercial shipping through the Strait of Hormuz, creating bottlenecks in global energy supply chains. Under normal conditions, nearly one-fifth of the world’s crude oil and LNG shipments pass through this key route.

US sanction waiver for Iran oil soon? What it means for India

India has not been buying crude oil from Iran since mid-2019 after the US ended waiver for sanctions on Iran crude. Around 35-40% of India’s crude oil needs are met through cargoes that make their way towards Asia through the Strait of Hormuz. The de facto closure of Strait of Hormuz since the start of the US-Iran war has disrupted supplies for India, even as it works to ensure safe passage for its tankers.To mitigate any oil supply shock, India has been aggressively buying Russian crude oil in the last few weeks. According to a Bloomberg report, India bought 30 million barrels of Russian crude in a week after the conflict broke out.

India’s annual imports of Iran oil (Source: Kpler)

So, if the US were to ‘unsanction’ Iran oil at sea, India would be able to step up procurement, adding an important source to its crude supply basket.According to Sumit Ritolia, Lead Research Analyst, Refining and Modelling at Kpler, historically, India was a major buyer of Iranian crude, importing significant volumes of Iranian Light and Heavy grades due to strong refinery compatibility and favourable commercial terms. The expert says that speculation in the market about a possible relaxation or modification of US sanctions on Iranian crude has brought a significant variable back into focus for global oil flows. “India could emerge as a key demand centre to watch, alongside Chinese buyers (state-owned enterprises and large independents) and other Asian countries,” Ritolia says.Following sanctions tightening in 2018, imports stopped from May 2019, with crude oil volumes getting replaced by Middle Eastern, US and other grades. At peak, Iranian crude accounted for around 11.5% of India’s total imports as per Kpler data.Also Read | Armageddon scenario! Why Iran’s missile strikes on Qatar’s LNG spell nightmare for Europe, AsiaAlso, just like easily available Russian crude on sea, the supply of Iranian crude also remains substantial. Roughly 170 million barrels are estimated to be on water, including volumes that are held in floating storage as well as shipments in transit. According to Ritolia, Indian refiners retain the ability to re-integrate these barrels with minimal operational adjustments, supported by prior processing experience and established trading setups.However, the expert believes that any resumption of imports will depend largely on commercial viability and geopolitical developments rather than technical readiness from India’s perspective.“Key considerations include the scope and durability of sanctions relief (including on shipping), pricing structure, and the availability of payment, insurance and logistics mechanisms. If these conditions align, a ramp-up in Indian imports of Iranian crude could be significant, similar to the rapid increase observed in Russian crude intake following the easing of Western sanctions,” he concludes.