A tentative shift in Washington’s Iran policy could bring India something it hasn’t had in nearly a decade: access to Iranian crude.
Treasury Secretary Scott Bessent floated the idea this week in a Fox News interview, suggesting the administration was considering easing restrictions on Iranian oil already at sea—roughly 140 million barrels, by his estimate—to cool global markets roiled by war.
For India, which imports 90% of its crude and has a long history of snapping up discounted Iranian barrels, even a limited opening could offer both relief and opportunity.
“India could emerge as a key demand centre to watch,” said Sumit Ritolia, a refinery and oil markets analyst at maritime intelligence firm Kpler, “alongside Chinese buyers and other Asian countries.”
A Policy Reversal in the Making?
The idea marks a striking potential reversal of long-standing U.S. policy. By allowing Iranian cargo currently on water to reach buyers, Washington hopes to ease supply tightness and temper prices—if only for 10 to 14 days, Bessent said.
The move could also redirect flows away from China, Tehran’s main buyer, forcing it to pay closer to market rates while making crude available to other Asian consumers, including India, Japan and Malaysia.
Bessent offered little detail on how such a waiver would be structured, or whether safeguards would prevent proceeds from flowing back to Tehran. The Treasury has declined to elaborate.
President Donald Trump was non-committal when asked if he backed the idea, saying only that “we will do whatever is necessary to keep the price” before trailing off.
India’s History With Iranian Crude
Before sanctions tightened in 2018, Iran was a major supplier to India, accounting for roughly 11.5% of total imports at its peak. Iranian Light and Heavy grades were well-suited to Indian refineries and often came with favorable pricing and payment terms.
Those flows halted in 2019, replaced first by Middle Eastern and American crude, and later by deeply discounted Russian barrels after the Ukraine war reshaped global trade.
When Russian oil became available at a discount, Indian refiners moved in quickly, ramping up imports with minimal disruption. Analysts argue a similar dynamic could play out if Iranian barrels re-enter the market.
“Indian refiners retain the ability to re-integrate these barrels with minimal operational adjustments, supported by prior processing experience and established trading setups,” Ritolia said.
The Numbers on the Water
Kpler estimates roughly 170 million barrels of Iranian crude are currently on water, including floating storage and cargoes in transit. Not all of it is uncommitted, but a portion remains unsold—representing potential incremental supply if sanctions enforcement weakens or is selectively eased.
India, the world’s fourth-largest refiner, has been hit hard by disrupted oil and gas supplies. More than 60% of its crude imports come from the Gulf—primarily Iraq, Saudi Arabia, Kuwait and the UAE. Half of these imports travel through the Strait of Hormuz, the narrow Gulf chokepoint now effectively closed by the conflict.
The Constraints
Any sustained return of Iranian oil hinges less on refining capability than on commerce and geopolitics. Sanctions do not just restrict sales; they complicate shipping, insurance and payments.
“Key considerations include the scope and durability of sanctions relief (including on shipping), pricing structure and the availability of payment, insurance and logistics mechanisms,” Ritolia said.
Unless these mechanisms are clarified or relaxed, transactions remain fraught.
The Political Hurdle
It’s unclear whether Bessent’s proposal will gain traction in Washington. The House of Representatives has just passed a bill to tighten sanctions on Iran’s oil sector —a signal that many in Congress are moving in the opposite direction.
The proposal follows other U.S. moves to boost supply, including releasing millions of barrels from reserves and easing some sanctions on Russian oil last week. But whether Iran sanctions follow the same path is far from certain.
What It Means for India
For Indian refiners, the prospect of Iranian crude returning is tantalizing. Historically, Tehran offered flexible payment terms and often sold at a discount to competing grades.
But until Washington clarifies the rules of engagement—how much oil, for how long, under what conditions—the 170 million barrels floating at sea will remain just out of reach.
“If the U.S. does move ahead, India will be ready,” said an official at a private refiner who spoke on condition of anonymity. “We’ve done this before”.
The question is whether the politics will align with the economics. For India, which has carefully balanced its ties with Washington and Tehran, any return to Iranian crude will require careful navigation. But with oil prices surging and the Strait of Hormuz effectively closed, the calculus may be shifting.
