Indian state refiners and government officials met over the weekend to hammer out contingency plans for a crisis in Iran that has all but stopped flows through the Strait of Hormuz, a narrow waterway vital for roughly half of the nation’s oil imports.
The world’s third-largest oil importer is considering options that include turning to Russian cargoes currently loitering near its waters, according to people familiar with the discussions. India became the single most important buyer of Moscow’s seaborne crude after the invasion of Ukraine, but the country has been cutting back in response to US pressure — particularly after a US trade deal struck last month that rolled back punitive tariffs.
India has since kept Russian oil purchases to a minimum, and in February loaded just over 1 million barrels a day — roughly half of the amount imported at the peak, and the lowest level since September 2022. Much of that shortfall has been filled with Middle Eastern barrels.
Oil ministry officials — indicating India has supplies that could last up to two weeks, between commercial and state reserves — are now pushing for the Ministry of External Affairs to seek some room for maneuver from Washington. As of late last week, there were 9.5 million barrels of Russian oil sitting in Asian waters.
A spokesperson for the oil ministry did not respond to Bloomberg queries.
Processors also have a limited number of other alternatives, including tapping India’s strategic petroleum reserve, fast-tracking supplies from Venezuela and pushing domestic producers to raise output, the people said, asking not to be named as the conversations are not public. They added refiners were also asking Saudi Aramco to ship more crude via pipeline to the Red Sea port of Yanbu, which would avoid Hormuz.
Should the crisis drag on and continue to curb flows, the government could consider curbing fuel exports to secure enough supply for domestic consumers, the people said. It can prioritize household gas and piped supplies, potentially directing industrial users to switch fuels.
Officials could also press private giant Reliance Industries Ltd to divert more fuel to the domestic market, while other refiners tweak output to maximize liquefied petroleum gas production at the expense of products such as naphtha, the people said.
A Reliance spokesperson did not immediately respond to a request for comment.
India has been filling its strategic oil reserve, but the stockpile remains far more modest than China’s. Oil Minister Hardeep Puri told lawmakers last month that India holds about 30 million barrels — equivalent to roughly six days of consumption. It is also limited to crude, meaning official reserves do not include liquefied petroleum gas or liquefied natural gas.
That, combined with the sheer volume of demand, leaves the country particularly vulnerable to a drawn-out war in the Middle East.
About 2.5 million to 2.7 million barrels a day of India-bound crude pass through Hormuz, according to Kpler. Nearly two-thirds of LNG shipments and about 95% of LPG supplies also come from Middle East, mostly through the chokepoint.
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