India faces uncertainty over Russian oil imports as US waiver nears expiry

The ongoing conflict involving Iran has disrupted oil shipments from the Persian Gulf, impacting major buyers such as India, the world's third-largest crude importer. Indian oil refiners may need to reduce Russian crude imports if the US does not extend its sanctions waiver beyond this weekend. This waiver currently allows countries, including India, to purchase Russian oil despite broader sanctions.

Key Highlights

• US waiver on Russian oil imports for India expires May 16
• Indian refiners may face higher costs if waiver is not extended
• Imports of Russian oil reached 2.3 million barrels per day in May
• State refiners have started sourcing oil from West Africa and the US

US Waiver Expiry and Its Impact

The US has not confirmed whether it will renew the waiver, which is set to expire on May 16. People familiar with the outlook of Indian refiners, who requested anonymity, say that without an extension, Indian processors may have to seek alternative and more expensive spot oil from other suppliers. The uncertainty has led to concerns over supply security and cost increases for Indian refiners.

According to Kpler data, Indian imports of Russian oil have reached a record 2.3 million barrels per day so far in May. This surge is due to the waiver permitting imports of Russian oil that had already been loaded. However, if no new shipments are sent from Russia to India, the total monthly imports could fall to 1.9 million barrels per day.

Refiners Seek Alternative Sources

In response to the looming deadline, India's two largest state refiners, Indian Oil Corp. (IOC) and Bharat Petroleum Corp. (BPCL), have purchased crude oil from West Africa and the United States this week. Traders familiar with these transactions report that these were prompt cargoes scheduled to load as early as this month.

BPCL has also started exploring short-term supply agreements for Azeri and African crude grades. This move aims to reduce reliance on Persian Gulf oil and diversify supply sources. Both IOC and BPCL did not respond to requests for comment on these developments. India's oil ministry also did not reply to an emailed inquiry.

Background on US Sanctions and Waivers

The US imposed sanctions on Russian oil as part of efforts to increase pressure on Moscow following its invasion of Ukraine. On March 5, the US issued a waiver specifically for India, allowing the purchase of stranded Russian oil cargoes. A week later, the waiver was expanded globally and later extended, but it is now set to expire on May 16.

The US relaxation of sanctions reflects the complex trade-offs in its strategy against Tehran, which began in February and led to a near-total halt of crude flows through the Persian Gulf. The situation remains fluid as Indian refiners await clarity on the waiver's future.

CarBike 360 Says

As the US waiver deadline draws closer, India stands at a critical crossroads in its energy strategy. Balancing geopolitical pressures with domestic fuel demands will be key in the coming months. Any disruption in Russian oil imports could reshape sourcing patterns, potentially impacting prices and supply stability, making strategic diversification and diplomatic agility more important than ever.