The US has temporarily allowed India to buy Russian oil currently stuck at sea in an effort to keep global supplies flowing and temper further price increases.
The US treasury has issued a 30-day waiver allowing India to buy Russian oil, having previously imposed heavy sanctions related to the war in Ukraine.
“To enable oil to keep flowing into the global market, the treasury department is issuing a temporary 30-day waiver to allow Indian refiners to purchase Russian oil,” the treasury secretary, Scott Bessent, said in a statement posted to social media on Thursday. “This stopgap measure will alleviate pressure caused by Iran’s attempt to take global energy hostage.”
In August the US president, Donald Trump, imposed an additional 25% import tariff on India over its purchase of cheap Russian oil, arguing that New Delhi’s purchases were undermining US sanctions and helpingVladimir Putin bankroll the invasion of Ukraine.
“This deliberately short-term measure will not provide significant financial benefit to the Russian government as it only authorises transactions involving oil already stranded at sea,” Bessent said.
He added that he expected India to eventually buy more US oil. Meanwhile, the Kremlin spokesperson, Dmitry Peskov, told reporters on Friday that the war in Iran had fuelled demand for Russian energy products.
China imported record levels of Russian crude last month but some market observers have warned that Russia may not have the capacity to increase its output further.
Iran’s effective blockade on the strait of Hormuz after last weekend’s strikes by the US and Israel has ignited fears of energy supply shortages across the globe.
Qatar’s energy minister warned on Friday that the escalating regional conflict could “bring down the economies of the world” by causing a surge in energy costs.
Saad al-Kaabi told the FT that Gulf energy exporters would be forced to shut down oil and gas production within days, which could drive oil to $150 (£112) a barrel. Kuwait has reportedly begun cutting production at some oilfields, pushing up the price of oil 5% to above $90 a barrel on Friday.
Indian refiners are buying millions of barrels of Russian crude oil cargoes as India seeks to navigate an oil supply crunch triggered by the Middle East conflict.
“The [US] measure is aimed at Russian oil that is already stranded at sea, so should be viewed as more of a short-term relief for Asian refiners,” analysts at Deutsche Bank said.
Global Witness accused the White House of helping to “fuel Putin’s war machine”, and warned that this “effectively sacrifices the people of Ukraine to combat an oil price crisis that the US and Israel have, themselves, triggered”.
The Global Witness chief executive, Mike Davis, said: “After four years of war, countries should be coming together to end the bloodshed, not inflating Putin’s war chest. It is time for peace.”
India was the top buyer of Russian seaborne crude after Moscow’s 2022 Ukraine invasion, but in January its refiners started to reduce purchases under pressure from Washington. Cutting Russian oil purchases helped New Delhi avoid 25% tariffs and clinch an interim trade deal with the US.
India is vulnerable to energy supply shocks, with crude stocks covering only about 25 days of demand. India receives about 40% of its oil imports from the Middle East through the strait of Hormuz.
A source directly involved with the matter said India had approached Trump’s administration seeking approval to buy Russian crude imports because of the Iran conflict, Reuters reported.
The state refiners Indian Oil, Bharat Petroleum, Hindustan Petroleum, and Mangalore Refinery and Petrochemicals are reportedly talking to traders for prompt delivery of Russian cargoes.
Separately, the International Energy Agency executive director, Fatih Birol, said on Friday that looking to Russia for gas supplies would be economically and politically wrong.
“The current crisis in the Middle East has led to questions in some quarters about whether to go back to Russia or not,” Birol told reporters after a meeting of the European Commission president, Ursula von der Leyen, and EU commissioners on global energy markets.
“One of Europe’s historical mistakes was the overreliance of its energy sources on one single country, Russia.”
The European Commission is considering reducing the taxes and tariffs that inflate many countries’ energy bills, or letting governments use more state aid to support energy-intensive industries, two EU officials told Reuters.
In the UK, ministers are discussing the possibility of intervening to protect the public against soaring household energy bills.
