“India’s approach to energy sourcing is driven by the requirements of its 1.4 billion people. Our objective is to secure affordable energy supplies from diverse sources.”
That was Randhir Jaiswal, spokesman of the External Affairs Ministry giving an elliptical reply to a loaded question: is India buying oil from Iran?
Iranian Crude Could Return After Seven-Year Gap
The market buzz is India is buying Iranian oil from the spot market, so for the first time in almost seven years, Iranian crude will return to Indian refineries courtesy the US waiver that will continue until Aug 21. Important to note that refiners may prefer to wait until that date before altering procurement strategies.
Most Indian refiners have already secured their crude requirements for the coming months. Alternative supplies are readily available, and uncertainties remain over shipping, insurance and banking arrangements connected to Iranian cargoes.
Energy analysts believe any return of Iranian crude to India, if it happens, is more likely to occur gradually rather than through an immediate surge in imports.
Prior to sanctions being reimposed in 2018, Iran consistently ranked among India’s largest crude oil suppliers. Indian refiners valued Iranian grades for their compatibility with existing refining infrastructure, competitive pricing and favourable payment terms.
Even if India does not immediately resume large-scale purchases, the availability of additional supplies in the market could help moderate global oil prices and strengthen New Delhi’s bargaining position with existing suppliers.
Every dollar decline in crude oil prices translates into substantial savings for an economy that spends well over $100 billion annually on energy imports.
Hormuz Shipping Remains Critical
Beyond the question of crude supplies lies another critical issue: maritime security. A significant portion of India’s oil imports passes through the Strait of Hormuz. Any disruption there can immediately affect supply chains, freight costs and global energy prices.
In that respect, India can breathe easier. Jaiswal confirmed that “As of today, we have ten Indian-flagged vessels that remain in the region,” he said. “The traffic is going back and forth,” with 11 India-bound vessels emerging from the strait since June 17.
These included Indian crude oil tankers, LPG carriers and cargo ships transporting fertilisers destined for Indian ports. The fact that shipping has resumed is almost as important as the oil itself.
Officials are aware that the current opening could be temporary. They also understand that a durable easing of tensions would provide benefits extending far beyond direct purchases of Iranian crude.
If Iranian crude once again becomes commercially viable and geopolitically sustainable, it may eventually find its way back into Indian refineries.
