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Relevance: GS-II International Relations; GS-III Energy Security & Infrastructure Source: US Treasury notification & Kpler data, 2026

1 · What happened

The US Treasury has temporarily relaxed sanctions on Iran for 60 days (until August 2026), officially opening the door for countries like India to buy cheaper Iranian crude oil once again.

However, major Indian oil companies like IOCL, BPCL, HPCL, and Reliance aren’t rushing to place orders. Instead of jumping at the lower prices, they are carefully studying the risks. The hesitation is driven by the short timeframe, the fear of future US penalties, shipping insurance issues, and their current reliance on Russian oil.

2 · Why Indian Refiners Are Cautious

India imports over 85% of its crude oil. Until 2019, Iran was a top-three supplier, offering great perks like free shipping and 60 days to pay. That stopped when the US enforced strict sanctions. Now, even with a temporary green light, returning to Iran is complicated.

The Russian Factor
Locked into Russian Crude
Since 2022, Indian refineries have adapted their machinery and signed long-term contracts to process heavily discounted Russian oil (Urals blend). Suddenly switching back to Iranian oil disrupts this stable setup.
Balancing Act
Keeping Ties Alive (Chabahar)
India hasn’t abandoned Iran. In 2024, India signed a 10-year deal to run Iran’s Chabahar Port, vital for trade routes to Central Asia. India must maintain this friendship without triggering US oil sanctions.
The Legal Threat
US Secondary Sanctions (CAATSA)
Under US law (CAATSA), any foreign bank or company trading with Iran can be blocked from using US dollars and the global SWIFT banking network. A 60-day waiver isn’t long enough to risk this massive penalty.
Shipping Dangers
Insurance & “Dark Fleets”
Global maritime insurance companies refuse to cover ships carrying Iranian oil. To move the oil, companies must use unregulated “dark fleets” (old, untracked ships), which drastically increases the risk of accidents and oil spills.

  • Time is too short: Oil companies plan their purchases 2-3 months ahead. A mere 60-day window is too risky. Refiners are demanding massive discounts from Iran to justify taking the chance.
  • The Payment Headache: India used to pay Iran in Rupees through a special bank account. However, because India buys far more from Iran than it sells to them, the account became unbalanced. Currently, there is no safe, sanction-proof way to pay billion-dollar oil bills.
  • Why Iran is still tempting: Iranian oil is “heavy and sour.” While harder to refine, Indian refineries are specially built to handle this cheap crude. If a permanent US waiver is granted, Iran would be the perfect backup to Russian oil.
  • The Solution: India needs quiet diplomacy to secure a long-term US waiver, while also building non-dollar payment systems, like the Asian Clearing Union (ACU), to protect its trade.

UPSC Prelims Quick Facts
JCPOA (2015) The Iran Nuclear Deal. Signed by Iran and the P5+1 nations. The US controversially pulled out in 2018, restarting sanctions.
SWIFT The global messaging network banks use to transfer money securely. Sanctioned countries get blocked from using it.
Asian Clearing Union (ACU) A regional payment system (including the RBI) that settles trade in local currencies to reduce reliance on the US Dollar.
INSTC The International North-South Transport Corridor. A massive trade route connecting India to Russia and Europe via Iran.
Chabahar Port A crucial Iranian port operated by India. It bypasses Pakistan, giving India direct access to Afghanistan and Central Asia.
Dark Fleet / Ghost Fleet Old, uninsured oil tankers that turn off their tracking devices to illegally move sanctioned oil from Russia, Iran, and Venezuela.
Strategic Petroleum Reserve (SPR) India’s massive underground emergency oil tanks (in places like Visakhapatnam and Mangaluru) to protect against sudden global oil shortages.

MCQ Practice
Q. Regarding India’s oil trade and US sanctions on Iran, consider these statements:

  1. The Joint Comprehensive Plan of Action (JCPOA) was signed in 2015, but the US unilaterally abandoned it in 2018.
  2. The Significant Reduction Exception (SRE) waivers currently allow India to import unlimited amounts of Iranian oil without facing US sanctions.
  3. The International North-South Transport Corridor (INSTC) is a trade route connecting India to Russia and Europe through Iran.

Which of the statements given above is/are correct?
(a) 1 and 2 only    (b) 2 and 3 only    (c) 1 and 3 only    (d) All of the above

Answer: (c) 1 and 3 only

  • Statement 1 is Correct: The JCPOA (Iran Nuclear Deal) was signed in 2015, but the US pulled out in 2018 under President Trump.
  • Statement 2 is Incorrect (UPSC Trap): SRE waivers were canceled entirely in May 2019. They never allowed “unlimited” imports anyway. The current 60-day window is a completely new, short-term measure.
  • Statement 3 is Correct: The INSTC is indeed a massive 7,200 km multi-mode network moving freight between India, Iran, Russia, and Europe.
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