Before the sound of artillery fire at Hormuz had even subsided, India resumed its oil purchases from Iran.
2026-04-06 17:12:12
Against the backdrop of global energy supply chain turmoil caused by the US-Israel war against Iran and persistently high international oil prices, India has officially resumed its oil and gas purchases from Iran after a seven-year hiatus. This move not only injects new variables into the tense energy market, but also clearly outlines the strategic boundaries and pragmatic considerations of this South Asian power in the US-Iran rivalry.
As the world's third-largest oil importer and second-largest consumer of liquefied petroleum gas (LPG), India is extremely sensitive to the stability of its energy supply.
Following the US-Israeli military strike on Iran, navigation in the Strait of Hormuz was disrupted—this strategic waterway carries 50% of India's crude oil imports and the vast majority of its LPG shipments, LPG being the core cooking fuel for Indian households and businesses.
The conflict in the Middle East has caused India's daily crude oil imports from the region to plummet from 2.6-2.7 million barrels to 1.2-1.3 million barrels, creating an imminent supply gap.
Against this backdrop, India’s Ministry of Petroleum and Natural Gas recently announced that domestic refineries have secured crude oil supplies from more than 40 countries, including Iran. A ship carrying 44,000 tons of Iranian LPG has successfully berthed and unloaded at a port in southern India, marking the official resumption of energy trade between Iran and India, which had been interrupted since 2019.
India's decision reflects clear strategic considerations. Apit Chatuvedi, a South Asia consultant at Skywise Consulting, points out that energy procurement is essentially a key mechanism for building mutual trust between India and Tehran, and also serves as a "risk hedging tool," demonstrating its neutral stance of not wanting to take sides in the conflict.
The core demand lies in navigation safety—there are still 17 Indian-flagged vessels waiting to pass through the Strait of Hormuz, and in recent weeks 7 vessels have successfully passed through after diplomatic negotiations with Iran. India hopes to exchange energy cooperation for Iran's continued cooperation on waterway security, which is directly related to the lifeline of its energy supply chain.
Policy Window: The Key Role of US Sanctions Waivers It is worth noting that this resumption of procurement was achieved within the framework of US sanctions waivers.
Amitengdu Palit, a senior fellow at the South Asian Institute, explained that the recent 30-day sanctions waiver issued by the United States, which allows countries to purchase Iranian crude oil shipped before March 20, provides India with a policy window. However, the future import volume will still depend on whether sanctions are reinstated and on regional geopolitical developments.
This premise also means that India's actions will not immediately provoke strong opposition from Washington, but clearly convey the clear boundaries of its pro-American inclination.
India’s balancing act is particularly evident in its relations with the United States.
Although it was widely believed that New Delhi had leaned toward Washington after the outbreak of the Middle East conflict, the reliability of the United States in times of crisis has been tested time and again.
While US President Trump called on countries to join the US-led Strait of Hormuz naval coalition, India chose a different path—seeking safe passage for its ships through bilateral negotiations with Iran, rather than getting involved in US-led military cooperation.
Rema Bhattacharya, head of Asia research at Verizon Maple Croft, analyzed that this decision to deliberately maintain strategic distance reflects both India's energy pragmatism and its cautious attitude of not wanting to be publicly involved in conflicts not initiated by itself, in order to avoid affecting the stability of its energy imports due to geopolitical alignment.
The diversification of energy procurement further highlights India's pragmatic choices.
In an effort to secure a trade agreement with the United States, India had reduced its imports of Russian oil. However, after the disruption of Middle Eastern supplies, the global energy market became strained, causing discounts on Russian crude oil to disappear. India not only resumed its purchases of Russian oil (daily imports increased from 1 million barrels to 1.9 million barrels as of March 24), but also had to face soaring procurement costs. The average price of India's crude oil basket surged from $69 per barrel in February to $113 per barrel in March, directly increasing the pressure on import payments and potentially impacting the rupee exchange rate.
In this context, restarting purchases of Iranian oil and gas has become an important supplementary option. Iranian crude oil is not only competitively priced, but also highly compatible with Indian refinery facilities, and was India's third-largest source of oil supply in 2018.
However, India's strategic choice also faces real challenges.
Iran remains excluded from the SWIFT settlement system, limiting its international payment channels. Furthermore, Iranian sellers have tightened payment terms, demanding immediate or short-term settlements, which poses a significant challenge for Indian companies that have been out of cooperation for seven years and need to rebuild their compliance processes and channels.
However, the Indian Ministry of Petroleum explicitly denied any payment barriers, emphasizing that companies have complete flexibility in choosing their supply sources, demonstrating its determination to advance this cooperation.
From a broader geopolitical perspective, India's resumption of oil and gas purchases from Iran is an important step in its "partnership diversification" strategy.
This is also one of the results of Iran's recent continuous engagement with neighboring countries.
Against the backdrop of the Trump administration imposing an additional 25% tariff on Indian exports and accusing India of importing Russian crude oil to support the war in Ukraine, India is clearly unwilling to tie its energy security to a single country or bloc.
By maintaining energy cooperation with the United States, Russia, Iran, and several Middle Eastern countries, India is attempting to build a stable supply network that transcends the current conflict cycle, maximizing its own interests in the great power game.
The continued opening of the Strait of Hormuz and Iran's acquisition of strategic support from neighboring countries (Russia, China, etc.) are fundamentally eroding the hegemonic position of the petrodollar.
The core logic of the petrodollar system is that global oil trade is settled in US dollars, thus forming a closed loop of "oil-dollar-US debt". The premise of this closed loop is that oil-exporting countries rely on the settlement of US dollars.
Currently, with the dual support of Russian military backing and Chinese economic cooperation, Iran's oil export capacity is rapidly recovering. The number of ships passing through the Strait of Hormuz daily has rebounded from less than 10 at the beginning of the conflict to more than 25, and Iran's daily crude oil exports are expected to increase from 1.5 million barrels before the war to 2.8 million barrels.
More importantly, Iran is working with neighboring countries to build a "non-dollar settlement network".
This network has expanded further after India resumed its oil and gas purchases from Iran—if India-Iran trade is no longer settled in US dollars, it will directly divert about 3% of the global petrodollar transaction volume.
In the long run, the "energy supply-non-dollar settlement" alliance forming around Iran is breaking the single dependence of oil trade on the dollar, forcing some Middle Eastern oil-producing countries to reassess their settlement currency choices, and the monopoly of the petrodollar is facing a challenge from regional alternatives for the first time.
Furthermore, navigational safety in the Strait of Hormuz is no longer dominated by the United States, but has instead become a multilateral coordination mechanism "led by Iran, endorsed by China and Russia, and participated in by India," which weakens the United States' ability to maintain the petrodollar system by controlling key waterways.
When energy transportation security is decoupled from dollar settlements, more countries will be willing to try non-dollar settlements, and the credibility of the petrodollar will be continuously weakened.
Background: Energy Shortage Forces Resumption of Cooperation
As the world's third-largest oil importer and second-largest consumer of liquefied petroleum gas (LPG), India is extremely sensitive to the stability of its energy supply.
Following the US-Israeli military strike on Iran, navigation in the Strait of Hormuz was disrupted—this strategic waterway carries 50% of India's crude oil imports and the vast majority of its LPG shipments, LPG being the core cooking fuel for Indian households and businesses.
The conflict in the Middle East has caused India's daily crude oil imports from the region to plummet from 2.6-2.7 million barrels to 1.2-1.3 million barrels, creating an imminent supply gap.
Against this backdrop, India’s Ministry of Petroleum and Natural Gas recently announced that domestic refineries have secured crude oil supplies from more than 40 countries, including Iran. A ship carrying 44,000 tons of Iranian LPG has successfully berthed and unloaded at a port in southern India, marking the official resumption of energy trade between Iran and India, which had been interrupted since 2019.
Core demands: Building mutual trust and ensuring air traffic safety
India's decision reflects clear strategic considerations. Apit Chatuvedi, a South Asia consultant at Skywise Consulting, points out that energy procurement is essentially a key mechanism for building mutual trust between India and Tehran, and also serves as a "risk hedging tool," demonstrating its neutral stance of not wanting to take sides in the conflict.
The core demand lies in navigation safety—there are still 17 Indian-flagged vessels waiting to pass through the Strait of Hormuz, and in recent weeks 7 vessels have successfully passed through after diplomatic negotiations with Iran. India hopes to exchange energy cooperation for Iran's continued cooperation on waterway security, which is directly related to the lifeline of its energy supply chain.
Policy Window: The Key Role of US Sanctions Waivers It is worth noting that this resumption of procurement was achieved within the framework of US sanctions waivers.
Amitengdu Palit, a senior fellow at the South Asian Institute, explained that the recent 30-day sanctions waiver issued by the United States, which allows countries to purchase Iranian crude oil shipped before March 20, provides India with a policy window. However, the future import volume will still depend on whether sanctions are reinstated and on regional geopolitical developments.
This premise also means that India's actions will not immediately provoke strong opposition from Washington, but clearly convey the clear boundaries of its pro-American inclination.
Balancing with the US: A pragmatic choice to refuse taking sides
India’s balancing act is particularly evident in its relations with the United States.
Although it was widely believed that New Delhi had leaned toward Washington after the outbreak of the Middle East conflict, the reliability of the United States in times of crisis has been tested time and again.
While US President Trump called on countries to join the US-led Strait of Hormuz naval coalition, India chose a different path—seeking safe passage for its ships through bilateral negotiations with Iran, rather than getting involved in US-led military cooperation.
Rema Bhattacharya, head of Asia research at Verizon Maple Croft, analyzed that this decision to deliberately maintain strategic distance reflects both India's energy pragmatism and its cautious attitude of not wanting to be publicly involved in conflicts not initiated by itself, in order to avoid affecting the stability of its energy imports due to geopolitical alignment.
Diversified Layout: An Inevitable Adjustment to Cope with Soaring Costs
The diversification of energy procurement further highlights India's pragmatic choices.
In an effort to secure a trade agreement with the United States, India had reduced its imports of Russian oil. However, after the disruption of Middle Eastern supplies, the global energy market became strained, causing discounts on Russian crude oil to disappear. India not only resumed its purchases of Russian oil (daily imports increased from 1 million barrels to 1.9 million barrels as of March 24), but also had to face soaring procurement costs. The average price of India's crude oil basket surged from $69 per barrel in February to $113 per barrel in March, directly increasing the pressure on import payments and potentially impacting the rupee exchange rate.
In this context, restarting purchases of Iranian oil and gas has become an important supplementary option. Iranian crude oil is not only competitively priced, but also highly compatible with Indian refinery facilities, and was India's third-largest source of oil supply in 2018.
Real-world challenges: Settlement difficulties and determination to move forward
However, India's strategic choice also faces real challenges.
Iran remains excluded from the SWIFT settlement system, limiting its international payment channels. Furthermore, Iranian sellers have tightened payment terms, demanding immediate or short-term settlements, which poses a significant challenge for Indian companies that have been out of cooperation for seven years and need to rebuild their compliance processes and channels.
However, the Indian Ministry of Petroleum explicitly denied any payment barriers, emphasizing that companies have complete flexibility in choosing their supply sources, demonstrating its determination to advance this cooperation.
Geopolitical perspective: Strategic layout of diversified partners
From a broader geopolitical perspective, India's resumption of oil and gas purchases from Iran is an important step in its "partnership diversification" strategy.
This is also one of the results of Iran's recent continuous engagement with neighboring countries.
Against the backdrop of the Trump administration imposing an additional 25% tariff on Indian exports and accusing India of importing Russian crude oil to support the war in Ukraine, India is clearly unwilling to tie its energy security to a single country or bloc.
By maintaining energy cooperation with the United States, Russia, Iran, and several Middle Eastern countries, India is attempting to build a stable supply network that transcends the current conflict cycle, maximizing its own interests in the great power game.
The opening of the Strait of Hormuz and the impact of Iran's surrounding region on the petrodollar
The continued opening of the Strait of Hormuz and Iran's acquisition of strategic support from neighboring countries (Russia, China, etc.) are fundamentally eroding the hegemonic position of the petrodollar.
The core logic of the petrodollar system is that global oil trade is settled in US dollars, thus forming a closed loop of "oil-dollar-US debt". The premise of this closed loop is that oil-exporting countries rely on the settlement of US dollars.
Currently, with the dual support of Russian military backing and Chinese economic cooperation, Iran's oil export capacity is rapidly recovering. The number of ships passing through the Strait of Hormuz daily has rebounded from less than 10 at the beginning of the conflict to more than 25, and Iran's daily crude oil exports are expected to increase from 1.5 million barrels before the war to 2.8 million barrels.
More importantly, Iran is working with neighboring countries to build a "non-dollar settlement network".
This network has expanded further after India resumed its oil and gas purchases from Iran—if India-Iran trade is no longer settled in US dollars, it will directly divert about 3% of the global petrodollar transaction volume.
In the long run, the "energy supply-non-dollar settlement" alliance forming around Iran is breaking the single dependence of oil trade on the dollar, forcing some Middle Eastern oil-producing countries to reassess their settlement currency choices, and the monopoly of the petrodollar is facing a challenge from regional alternatives for the first time.
Furthermore, navigational safety in the Strait of Hormuz is no longer dominated by the United States, but has instead become a multilateral coordination mechanism "led by Iran, endorsed by China and Russia, and participated in by India," which weakens the United States' ability to maintain the petrodollar system by controlling key waterways.
When energy transportation security is decoupled from dollar settlements, more countries will be willing to try non-dollar settlements, and the credibility of the petrodollar will be continuously weakened.
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