China Snaps Up Iran Oil, India Misses

Indian refiners have access to only limited Iranian volumes compared with Russian oil, and even the barrels on offer come with 'too many hassles'.

The Liberia-flagged tanker Shenlong Suezmax, loaded with Saudi Arabian crude

IMAGE: The Liberia-flagged tanker Shenlong Suezmax, loaded with Saudi Arabian crude arrives at a port in Mumbai, March 12, 2026 after transiting the Strait of Hormuz. Photograph: Francis Mascarenhas/Reuters

India's latest potential source of crude oil is now headed to China after Washington allowed purchases of sanctioned Iranian oil held in floating storage and in transit, according to traders, refining officials and ship-tracking data.

Key Points

Iranian crude available under US waiver is largely diverted to China, limiting India's access despite initial interest from refiners.
Indian refiners face major hurdles including sanctions-linked complexities, verification issues, and constrained timelines for procurement.
Major portion of Iranian oil is stored in or controlled by China, restricting availability for Indian buyers.
Short waiver window and unclear payment mechanisms make deals difficult for both private and State-run refiners.
China's independent refiners dominate sanctioned oil trade, reinforcing their advantage in accessing discounted crude supplies.

Iran oil flows shift to China

Indian refiners have access to only limited Iranian volumes compared with Russian oil, and even the barrels on offer come with "too many hassles", two senior traders at Indian refining companies said.

India has already concluded deals for more than 60 per cent of the 100 million barrels of Russian oil in storage for delivery in March and April, but less than a tenth of that volume is available from Iran.

Until US sanctions were reimposed in late 2018, Iran was India's third-largest oil supplier, after Iraq and Saudi Arabia.

US sanctions and waiver impact

Of the 140 million barrels of Iranian crude that Washington said were held in floating storage and available for sale and delivery until April 19, less than 10 million barrels are available to India, the two traders said.

The one-month window makes it difficult for state-run refiners to identify and validate sellers and arrange ships.

A senior refining official said oil sales were now largely controlled by traders linked to the Islamic Revolutionary Guard Corps (IRGC).

Before sanctions, the National Iranian Oil Company (NIOC) was the sole supplier of Iranian oil.

But it now has little control over sales, which are instead handled by "shadowy" interests backed by the IRGC through a network of front companies used to sell sanctioned oil and charter ships, UK-based Energy Intelligence said in a note.

'At present, Iran effectively has no floating crude or surplus volumes available for international markets. The remarks by the US treasury secretary appear aimed at reassuring buyers and managing market sentiment,' the Iranian consulate in Mumbai said in a statement.

India faces crude supply hurdles

Indian refiners -- both State-run companies and Reliance Industries Ltd (RIL) -- were keen to buy Iranian oil after Washington on March 20 granted a 30-day waiver for Iranian oil held in storage and in transit.

But traders said the supply chain was difficult to navigate, especially within the limited window set by Washington for the oil to be delivered and paid for by April 19.

It has been years since Iranian oil was freely traded, and the quality of the underlying crude is also unclear, said Vandana Hari, an international energy expert based in Singapore.

Reduced oil availability

The total quantity of Iranian oil in floating storage and transit is less than half of what Washington has claimed, global energy and geopolitics expert A F Alhajji said in a note.

He estimated that only 55 million barrels were in transit and about 15 million barrels were in floating storage.

Industry data providers Kpler and Vortexa estimate Iranian barrels in storage at 170 million.

But a third of that is out of bounds for India because it is stored in China.

More than 40 million barrels of crude oil are stored onshore in China in tanks in the Shandong province area, where China's independent refiners, also known as teapots, are located, Energy Intelligence said.

Another 16 million Iranian barrels are in floating storage in international waters near Malaysia, and 10 million are offshore China, according to the agency.

Teapots were the only buyers of sanctioned oil of any kind over the past several years, with close links to select traders selling Iranian oil, including Chinese trading houses.

Oil stored onshore in China is controlled by Chinese traders, Energy Intelligence said.

Historical supplies

At 830,000 barrels per day (bpd), Iranian supplies to India peaked in October 2016, led by more than 700,000 bpd of Iran Light and Iran Heavy, grades suited to generating high yields for Indian state-run refineries.

Towards the end of the US sanctions period in 2018-2019, Iran was offering India a freight discount that pushed imports in 2018 to a record 510,000 bpd, led by purchases by Indian Oil, Nayara Energy and Mangalore Refinery and Petrochemicals Ltd, according to Kpler data.

RIL in talks to buy 3 to 5 million barrels of Iranian oil, but no agreement has been reached yet, a senior industry official said. RIL declined to comment.

For State-run refiners, it is proving difficult to verify the credentials of sellers of Iranian oil, an official said.

It is also unclear whether payments can be made in dollars to the NIOC or to other traders, another official said.

Some traders are seeking payment in Chinese yuan, he added.

NIOC remains under US sanctions for financial dealings, so direct payments may not be possible unless the US grants specific exemptions, Hari said.

The US order allows 'all transactions prohibited by the above-listed authorities that are ordinarily incident and necessary to the sale, delivery, or offloading of crude oil or petroleum products of Iranian origin loaded on any vessel, including vessels blocked under the above-listed authorities, on or before 12:01 am eastern daylight time, March 20, 2026, are authorised through 12:01 am eastern daylight time, April 19, 2026.'

But a top official at a State-run refiner said that while the order addressed transactions such as docking, repairs and insurance, it was silent on payments.