Iran oil is back, but why are Indian refiners still holding back?

Iranian oil is back in play for Indian refiners after the US Treasury issued a waiver on June 22 allowing the production, delivery, and sale of Iranian oil, petroleum products, and petrochemicals until August 21.

The move has prompted the National Iranian Oil Company to reach out to international oil companies, including Indian refiners and trading houses, as Tehran looks to widen its market beyond China.

Sources in India’s refining sector told The Indian Express that companies are discussing the techno-commercial feasibility of lifting Iranian barrels under the waiver, but industry insiders do not expect large-scale buying in the near term. The immediate interest is being treated as an opportunity test rather than a return to regular trade.

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Payments, sanctions and other awkward inconveniences

The caution is rooted in the practical complications that have long shadowed the Iranian oil trade. Refiners are assessing whether purchases can be made without sanctions exposure, whether payments can move smoothly, and whether insurance and shipping can be arranged without triggering legal or compliance problems.

Sumit Ritolia, manager of modeling and refining at Kpler, said that refiners will focus on “the durability of sanctions relief, pricing and discounts, and the availability of payment, insurance, shipping, and logistics mechanisms,” adding that “payment remains the biggest hurdle.”

Abu Dhabi-based analyst Natalia Katona said banking remains a central obstacle because Iranian banks are still heavily sanctioned. She said Indian companies may start buying, but the pool of buyers is likely to remain limited.

Old memories linger in the oil patch

The current waiver is also being read against India’s previous experience with Iranian crude. After a near seven-year gap, Indian refiners bought Iranian oil again in April, but volumes were modest at 530,000 tonnes, or roughly 3% of India’s oil imports that month, according to DGCIS data.

India had stopped importing Iranian oil in 2019 after the earlier US waiver expired and sanctions snapped back. Before that, Iran had been a major supplier; India imported 27.1 million tonnes in 2016-17, making Tehran the third-largest source of crude after Saudi Arabia and Iraq.

That history is shaping current caution. Ritolia said refiners are unlikely to commit large volumes while sanctions policy remains unstable because the crucial issue is not just access to crude today but “confidence that the trade can continue tomorrow.”

A waiting game across the Gulf

The market logic still favors restraint. China is likely to re-emerge as the dominant buyer of Iranian crude once flows through the Strait of Hormuz normalize, and Indian refiners may have to compete with Chinese buyers for cargoes, especially if discounts on Iranian oil narrow.

Katona said refiners could focus on already-loaded cargoes in the Gulf, which would be faster to lift and reach India in about a week, but those barrels may also be in high demand. India’s diversified crude sourcing over recent years has reduced urgency, meaning Iranian oil may matter more as a bargaining chip with current suppliers than as a near-term volume play.

A lot now depends on what Tehran offers and how long Washington’s waiver actually lasts.

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FAQs

Q1: Why are Indian refiners not rushing to buy Iranian oil despite the US waiver?

Ans: Indian refiners remain cautious because payment channels, insurance coverage, shipping arrangements and future sanctions risks are still uncertain.

Q2: Can India start importing Iranian crude oil again?

Ans: Yes, the recent US waiver allows limited Iranian oil sales, but Indian refiners are assessing commercial and regulatory risks before committing to purchases.