India stands to benefit significantly if the US lifts sanctions on seaborne Iranian oil, giving the world’s fifth-largest economy another lifeline to stay afloat amidst supply crunch led by the war in West Asia. US treasury secretary Scott Bessent said in an interview that the US may ‘un-sanction’ Iranian oil which is on the water.
“In the coming days, we may un-sanction the Iranian oil that is on the water, about 140 million barrels of oil. Depending on how you count it — it’s 10 days to 14 days of supplies which the Iranians are pushing out that would have all gone to China,” Bessent told Fox News.
The move, the treasury secretary insisted, would bring the oil prices down and follow the template of the US decision to un-sanction seaborne Russian crude.
“In essence, we will be using Iranian oils against the Iranian to keep the price down for next 10-14 days,” Bessent said.
India, which imports about 85 per cent of energy needs, is buying crude oil at an average of $117 a barrel in March, compared to $69 a barrel it did in February, according to government data.
However, the price of the country’s import crude oil basket touched $156.29 a barrel on Wednesday, reflecting a steady upward journey.
The Indian basket of crude oil represents a derived basket comprising of sour grade (Oman & Dubai average) and sweet grade (Brent dated) of crude oil processed in Indian refineries in the ratio of 78.71 to 21.29, respectively.
Oil and gas prices have shot up in the international market as West Asian producers such as Saudi Arabia, Qatar and Iraq are unable to send petroleum products carrying ships out to customers because Strait of Hormuz, the narrow Gulf chokepoint, is now effectively closed by the conflict.
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. China is the main buyer of Iranian oil now.
Following sanctions tightening in 2018, imports ceased from May 2019, with volumes replaced by West Asian, US and other grades. At peak, Iranian crude accounted for 11.5 per cent of India’s total imports according to maritime intelligence firm Kpler.
“Currently, Iranian crude availability remains elevated, with an estimated 170 million barrels on water, including floating storage and cargoes in transit. While part of these volumes is committed, a portion remains unsold, representing potential incremental supply if sanctions ease or enforcement weakens.
“Indian refiners retain the ability to re-integrate these barrels with minimal operational adjustments, supported by prior processing experience and established trading setups,” Sumit Ritolia, refinery and oil markets analyst at Kpler, said.
However, the flow of Iranian oil will depend on multiple factors such as 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,” Ritolia observed.