West Asia crisis: India to receive Iranian crude oil shipment
Amid the Israel-US conflict with Iran and the chokehold on the Hormuz Strait in the Persian Gulf, India’s first cargo of Iranian crude oil since 2019 is set to head towards a port in Gujarat.
The move comes in the backdrop of surging crude prices due to the West Asian crisis; Indian refiners have been seeking to ramp up procurement of a few cargoes of Iranian oil on water following the recent sanctions waiver by Washington.
“The Indo-Iranian oil trade has flickered back to life. Following the US administration’s decision to grant a 30-day window for Iranian oil ‘on the water’ due to regional conflict, the vessel Ping Shun is now en route to Vadinar (in Gujarat) with 600,000 barrels of crude. This is the first such delivery since May 2019 and comes at a critical time for Indian refiners facing tightening inventories,” said Sumit Ritolia, Lead Research Analyst, Refining and Modelling at commodity market analytic firm Kpler.
“The Aframax Ping Shun (IMO 9231901) loaded with Iranian crude oil from Kharg Island in early March has emerged as the first vessel observed signalling a destination of Vadinar, India since May 2019, following sanction reimposition on Iranian oil by the first Trump administration,” Ritolia said.
While the identity of the buyer could not be ascertained, Vadinar is home to a 20 million-tonne-a-year oil refinery of Russian oil giant Rosneft-backed Nayara Energy. It is also the landing point for crude oil that goes to the Bina refinery of Bharat Petroleum Corporation Ltd (BPCL). The petroleum ministry has so far maintained that techno-commercial feasibility will drive the decision on resuming Iranian crude supplies. 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. However, after sanctions in 2018, imports ceased from May 2019, with volumes replaced by Middle Eastern, US and other grades.
Iranian crude accounted for 11.5 per cent of India’s total imports before the sanctions regime.
India used to buy 518,000 barrels per day of Iranian oil in 2018, which slowed to 268,000 bpd between January and May 2019 when the US granted waivers to a few buyers. Subsequently, imports came to a naught. Back in 2009-10, India imported 22.1 million tonnes of Iranian crude, and it accounted for 14.4% of India’s overall oil imports, according to data from the Ministry of Commerce and Industry.
Last month, the US waived sanctions on the purchase of Iranian oil at sea for 30 days in its bid to ease oil prices that have spiralled up following the US-Israeli war on Iran. That waiver expires on April 19. An estimated 95 million barrels of Iranian oil are on vessels at sea, of which around 51 million barrels could be sold to India, while the remaining are compatible for buyers in China and Southeast Asia.
“The tanker is estimated to have loaded approximately 600 kb (600,000 barrels) from Kharg Island around 4 March, with a declared ETA to Vadinar on 4 April,” Ritolia added. While the US waiver allowed countries to purchase those barrels, the mode of payment remains unclear.
Post the sanctions, Iran remained cut off from SWIFT (Society for Worldwide Interbank Financial Telecommunication) -- a global messaging network used by banks and financial institutions to securely send and receive information about financial transactions.
Last purchases from Iran were made in euros using a Turkish bank as a go-between, but that option no longer exists.
Iran was cut off from the SWIFT system in March 2012 following European Union sanctions over its nuclear programme, with the move forcing the disconnection of multiple Iranian banks and severely restricting global financial transactions.
Further disruptions occurred in 2018 after the US reimposed sanctions, leading to renewed suspension of several Iranian banks from the network, constraining Tehran’s ability to conduct international trade, receive oil payments and access foreign currency reserves.
