Photo: Marine Traffic
The United States has allowed India to temporarily increase purchases of Russian oil, easing pressure on the world’s third-largest oil importer as escalating tensions in the Persian Gulf disrupt global energy flows, Bloomberg reports.
A temporary license issued on Thursday, March 5, covers transactions involving Russian crude oil and petroleum products that were loaded onto vessels before March 5, provided they are delivered to India and purchased by an Indian company. The license will expire at 12:01 a.m. Washington time on April 4.
“To ensure oil continues flowing to global markets, the US Treasury is issuing a temporary 30-day exemption allowing Indian refineries to purchase Russian oil. This deliberately short-term measure will not provide significant financial benefit to the Russian government because it only allows transactions involving oil that is already stranded at sea,” US Treasury Secretary Scott Bessent said in a post on X.
The move, aimed at easing pressure on oil supplies, offers immediate relief to at least one of the economies most affected by disruptions following the latest escalation in the Middle East. With access to large volumes of Russian crude, Indian refineries could quickly boost purchases and stabilize operations.
“Although this is a temporary waiver primarily intended to clear stranded cargoes, it provides a critical short-term buffer for India’s refining sector while potentially reshaping pricing dynamics for Russian crude and trade flows in the coming weeks,” said Sumit Ritolia, an analyst at Kpler.
He added that discounts on Russian oil are likely to shrink as competition for available supplies increases.
According to vessel-tracking data and Kpler estimates, nearly 11 million barrels of Russian crude are currently sitting on tankers idling across Asia, with about 70% located off the coast of China and in the Singapore Strait. However, additional tankers remain in transit, suggesting the total could be even higher.
Kpler data also show that of the roughly 5 million barrels per day India imports, only about one-fifth came from Russia in February. Other major suppliers include Iraq, Saudi Arabia and the United Arab Emirates, but a significant share of shipments from those countries has been disrupted due to the effective closure of the Strait of Hormuz.
“This could slightly ease market pressure in the near term, but ultimately the loss of around 20 million barrels per day of supply from the Persian Gulf cannot be offset,” said Warren Patterson of ING Groep NV in Singapore.
“The only way to achieve a more sustained drop in prices is to restore oil flows through the Strait of Hormuz,” he added.
The sanctions waiver, along with other signals from the administration of US President Donald Trump that it is considering all options to contain rising oil prices, helped cool benchmark prices during early Asian trading on Friday, March 6. However, the overall impact on India and the broader market may be limited in both duration and scale. Additional crude supplies also do little to address shortages of liquefied natural gas and cooking fuel in India.
“Many of these measures are reactive rather than part of a carefully designed plan that fully accounts for all the risks,” said Rebecca Babin of CIBC Private Wealth Group.
Indian refiners and government officials have been considering several emergency measures this week to deal with supply disruptions, including switching to Russian cargoes. India’s oil ministry has also urged diplomats to seek flexibility in Washington, while finance officials held talks with the US Treasury about easing restrictions.
India has also held discussions with the US to clarify a proposed insurance mechanism for tankers passing through the Strait of Hormuz. The country’s refiners are already feeling the impact of supply disruptions. Mangalore Refinery and Petrochemicals Ltd. told customers it would suspend exports of petroleum products and shut down one of its three processing units due to low inventories.
India was not traditionally a major buyer of Russian oil, but after Russia’s full-scale invasion of Ukraine in 2022 it significantly increased purchases to take advantage of discounted cargoes. The administration of President Donald Trump had been trying for months to curb this trade in an effort to pressure the Kremlin into a peace deal, introducing punitive tariffs on Indian goods and sanctions against two of Russia’s largest oil producers.
Those tariffs were softened as part of a trade agreement reached between New Delhi and Washington last month, and India has since reduced its purchases of Russian crude to minimal levels.
