India restarts Iranian crude oil imports after seven years, citing no obstacles in payment methods

Sourced from: Caixin

As the Middle East conflict disrupts energy supplies flowing through the Strait of Hormuz, Indian refiners have begun purchasing Iranian crude oil. The Ministry of Petroleum and Natural Gas of India said on Saturday that this is the first time in seven years India has bought crude oil from Iran, and there are no issues on the payment side.

As the world’s third-largest crude oil importer and consumer, India has not received Iranian crude oil cargoes since May 2019. At that time, under U.S. pressure, India stopped purchasing Iranian crude oil. But now, the supply disruptions triggered by the Middle East conflict have dealt a clear blow to this South Asian country.

The Indian ministry said on the social platform X: “Against the backdrop of disrupted Middle East supply, Indian refining companies have ensured that their crude oil demand is met, including supplies from Iran; at the same time, there are no payment obstacles to importing Iranian crude oil.”

This statement is a rare, open acknowledgment of India’s energy ties with Iran. Last month, the United States temporarily eased some sanctions restrictions on exports of Iranian crude oil and petroleum products to ease supply tightness.

The Indian ministry added that India has locked in all its crude oil demand for the coming months. However, since Iran is still under strict sanctions, India’s refining industry continues to face complex challenges in areas including trading, shipping, and settlement arrangements.

The statement also noted: “India imports crude oil from more than 40 countries, and each company can flexibly procure from different sources and regions based on commercial considerations.”

In addition, India also purchased 44,000 tons of Iranian liquefied petroleum gas. The cargo was transported by a sanctioned vessel. The ministry said the ship docked at India’s western coast’s Mangalore Port on Wednesday and is currently unloading fuel.

India has been severely impacted by the more-than-a-month-long conflict in the Persian Gulf, especially as the Strait of Hormuz has nearly closed, significantly affecting its energy supply. Previously, about half of India’s crude oil relied on supplies from the Middle East, and most of its liquefied petroleum gas used for cooking also came from that region.

Since the outbreak of the Russia-Ukraine conflict in 2022, India has become an important buyer of Russian seaborne crude oil. However, its refining companies typically avoid purchasing “blacklisted” crude oil from sanctioned countries such as Venezuela or Iran, to avoid the risk of U.S. sanctions.

Beyond causing energy shortages, the war between the United States and Israel against Iran has also seriously affected India’s food security.

India is the world’s second-largest consumer of fertilizers, using more than 60 million tons each year. Most finished products and raw materials are imported from Gulf countries and transported through the Strait of Hormuz.

Analysts note that in countries such as India, the knock-on effects of shortages in natural gas and fertilizers could last for months, affecting farmers’ planting decisions and crop yields, and ultimately potentially leading to a decline in stocks of staple foods such as rice.

Meanwhile, shortages of oil and diesel, along with soaring electricity prices, will also severely constrain stages such as agricultural irrigation, harvesting, processing, storage, and transport, further intensifying concerns about supply tightness.

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Editor: Yang Ci