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Washington is temporarily easing sanctions on Russian oil sales to India to address potential supply shortages and reduce the impact of the surge in global crude prices in the wake of US and Israeli attacks on Iran.
US commerce secretary Scott Bessent said late on Thursday that the administration was issuing a temporary 30-day waiver to allow Indian refiners to purchase the oil.
“India is an essential partner of the United States, and we fully anticipate that New Delhi will ramp up purchases of US oil. This stop-gap measure will alleviate pressure caused by Iran’s attempt to take global energy hostage,” Bessent said in a social media post.
The decision to ease sanctions on Russia represents a major shift in policy for Washington.
For much of US President Donald Trump’s second term, India has clashed with the White House over its purchases of Russian oil.
Washington imposed a 50 per cent tariff on Indian imports over allegations New Delhi’s purchases of the oil helped finance Russia’s war in Ukraine.
India imports around 90 per cent of its crude supplies and the country became the biggest buyer of seaborne Russian crude after the full-scale invasion of Ukraine in 2022.
Trump last month agreed to drop the tariffs, saying New Delhi had agreed to “stop buying Russian oil”. India has always said its strategy was to diversify supply in line with market conditions.
Indian refiners, including the country’s largest, Reliance, have almost halved purchases from Russia to just over one million barrels per day from the peak in June.
India plugged the gap by sourcing oil from across the Arabian Sea, mainly Kuwait, Qatar, Saudi Arabia and the United Arab Emirates — supplies that have been severely disrupted by the widening conflict in the Middle East.
Prices have also soared, with US crude settling 9 per cent higher at $81.01 on Thursday, the highest level since July 2024. Brent crude settled up almost 5 per cent at $85.41.
India’s oil minister, Hardeep Singh Puri told reporters this week that “the country is well stocked with crude oil and inventories of key petroleum products” to handle “short-term disruptions arising from the Middle East”.
But roughly half of India’s 5mn b/d of total crude imports comes through the Strait of Hormuz and traffic is restricted because of the conflict. India’s reserves of about 100mn b/d could cover up to 45 days of imports.
The Indian National Shipowners’ Association, an industry body, this week outlined the scale of the problem when it said that 38 Indian ships were stuck.
It said many of those “are loaded with crude oil and LPG that is bound for India and the ships waiting south of the Hormuz Strait are waiting to load additional cargo”.
“Given the limited strategic reserves that India holds, we are certain that it is extremely important that our ships are able to gain free and safe passage,” the association said.
In the wake of the US policy shift, India would now restart the Russian supply chain, analysts said.
“The supply chain of Russian crude to India may now be more or less dormant, but India can activate it fairly quickly,” said Rajeev Lala, director of upstream solutions at S&P Global.
Kpler tanker tracking data indicates the continued availability of Russian cargoes in the Indian Ocean and Arabian Sea, including volumes in floating storage en route to Asian countries.
Analysts estimate there could be around 140mn barrels of Russian crude and condensate stranded at sea following Washington’s recent tightening of sanctions against Moscow, which was aimed at forcing it to negotiate a peace deal with Ukraine.
Harshraj Aggarwal, a Mumbai-based oil and gas analyst at Yes Securities, said India was already in a prime position to secure the “large chunk that will come from Russia, where the crude already lies in floating storage tankers”.
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Even without the US sanctions relief, Indian buyers would have looked at stranded, sanctioned barrels due to the run-up in prices caused by the Iran crisis, said Ben Cahill, director for energy markets and policy at the University of Texas at Austin.
An executive from one of the major Indian refiners said India “will have to buy oil whenever it is available from”.
“Trump will not come and give us oil. If India needs crude, it will look at all available options,” the person said.
If the crisis and blockage continue beyond the 30-day reprieve, India could come under more pressure, analysts say.
“Availability of Russian oil will be a challenge if all Asian countries go after it,” said Sabri Hazarika, energy analyst at Emkay Global Financial Services in Mumbai. “The discounts may also turn into premium and freight costs would also be higher.”
