In a strategic attempt to stabilise the volatile energy markets across the world, the United States has issued a temporary waiver allowing Indian refiners to purchase Russian oil cargoes that are stranded at sea.
This pragmatic shift in policy by the United States comes at a time when the conflict with Iran is still strangulating the energy supplies, most notably the Strait of Hormuz, on a knife-edge.
The waiver is strictly limited to shipments that were already loaded onto tankers before the most recent round of sanctions hit. By allowing this “stop-gap” measure, US Treasury Secretary Scott Bessent noted that the aim is to prevent a massive supply shortfall while simultaneously alleviating the pressure caused by Iran’s attempts to “take global energy hostage.” Bessent further emphasised that India remains an “essential partner” and expressed an expectation that New Delhi would eventually pivot more towards American oil as part of their long-term trade agreement.
For India, the timing is critical. Given the fact that the country has domestic reserves for merely 25 days and is already dependent on the Middle East for 40% of its imports, the closure of the Strait of Hormuz has made the country highly vulnerable. State-owned majors like Indian Oil and Bharat Petroleum are reportedly in talks to procure the prompt supplies, and sources indicate that 20 million barrels of the oil have already been booked by Indian refiners.
Interestingly, the economics of these deals have shifted dramatically. While Russian Urals crude was trading at a deep discount of $13 per barrel below Brent just weeks ago, traders are now offering it at a premium of $4 to $5 per barrel. As one trader remarked, the market has moved beyond bickering over price; the real struggle now is simply finding “available molecules” to keep the refineries running.
The decision by Washington is a result of a tricky balancing act, as it needs to ensure that Russia does not generate too much revenue, and at the same time, it does not cause a tailspin in global inflation by cutting off these shipments. By allowing these particular “on-the-water” shipments to arrive at Indian shores, the US is hoping to calm a global market, which has been shaken by the threat of a prolonged conflict in the Middle East region.
