New Delhi: The United States (US) Treasury's Office of Foreign Assets Control (OFAC) on Monday issued a temporary 60-day general licence authorising the production, sale and delivery of Iranian-origin crude oil, petroleum products and petrochemicals through August 21 — a move that reopens a legal path for Indian refiners, once major buyers of Iranian crude, to continue the purchase of Iranian crude oil through conventional channels.
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Under General License X, transactions "ordinarily incident and necessary" to the production, sale, delivery or offloading of Iranian-origin crude, petroleum products and petrochemicals, including dealings with vessels blocked under US sanctions, are authorised until 12:01 am EDT on August 21. The licence also covers supporting services such as shipping, insurance, bunkering, flagging and classification.
Treasury Secretary Scott Bessent, announcing the step on X, tied it to the ongoing US-Iran talks. "In line with the ongoing productive talks in Switzerland, Iran has committed to free and open transit in the Strait of Hormuz and to permit International Atomic Energy Agency (IAEA) inspectors into their country," he said. "As part of the framework, Treasury has issued a temporary 60-day general license authorising the production, delivery, and sale of Iranian oil."
The framework follows a memorandum of understanding signed last week between Washington and Tehran to end their conflict and extend a ceasefire for at least 60 days, with the accord calling for the reopening of the Strait of Hormuz. The conflict, which began in late February, had shut nearly all traffic through the strait and disrupted close to 20 percent of global oil supplies.
In a provision significant for buyers, the licence permits settlement in US dollars. "Any payment of funds owed to Iran, the Government of Iran, or any blocked person for the purchase of crude oil, petrochemical products, or petroleum products of Iranian origin authorised by paragraph (a) may be made in US dollar-denominated funds," said the OFAC order. Dollar settlement removes a hurdle that had earlier pushed India-Iran oil trade into rupee and escrow-based workarounds.
Ratings agency ICRA said the move was positive for both global markets and Indian refiners. "The announcement of opening of Strait of Hormuz and issuance of a temporary 60-day general license authorising production, delivery and sale of Iranian crude are positive for the tight crude oil markets. Iranian crude was historically available with credit period of 60-90 days as against 30 days of other crude producers which was beneficial for refiners due to lower working capital requirements besides which geographical proximity to India would benefit Indian refiners," said Prashant Vashisht, Senior Vice President and Co-Group Head, Corporate Sector Ratings, ICRA.
India imports roughly half its crude from the Middle East, much of it through the Strait of Hormuz, and Indian refiners had turned to Russian crude as the conflict disrupted Gulf supplies. Iranian barrels offer geographic proximity, longer credit terms and a discount, which together lower landed costs and working-capital needs for refiners.
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The authorisation is not open-ended. It does not extend to North Korea, Cuba, the covered regions of Ukraine or Crimea, or any activity prohibited under other US sanctions authorities.
Markets have already unwound much of the premium precipitated by the West Asia conflict: Brent, which had been driven above USD 120 a barrel during the disruption, was trading around USD 78 a barrel on Monday as Gulf supply normalised.
