The U.S. Treasury Department has granted India permission to purchase Russian oil and petroleum products for a 30-day period, ending April 4, in an effort to ease upward pressure on global oil prices that are impacting gasoline costs for U.S. consumers [1]. This decision comes amid the ongoing Iran war, which has tightened oil and gas markets, including Russia's crude, due to the effective closure of the Strait of Hormuz—a critical chokepoint for global oil shipments, now shut down to almost all tanker traffic [1]. The closure has disrupted the flow of oil and gas from major producers such as Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates, and Iran, which collectively account for 20% of the world's oil needs [1].
Following Russia's invasion of Ukraine in February 2022, China and India became Russia's largest oil customers after the European Union imposed a boycott [1]. Previously, U.S. President Donald Trump had imposed 25% tariffs on India for continuing to buy Russian oil, but these tariffs were dropped on February 6 in exchange for a promise from India to stop purchasing Russian oil, leading to a decrease in Indian imports from Russia [1].
The market has responded to these developments with a significant rise in oil prices. On Friday, international benchmark Brent crude climbed to $89 per barrel, up from just under $73 a week earlier, coinciding with the onset of new conflict in the Middle East [1]. Russia's Urals blend export price also surged to $70, up from below $40 in December [1]. This spike in prices has temporarily reversed Russia's declining fossil fuel revenues, which had been impacted by weak global prices and tightening Western sanctions, including measures against Russia's "shadow fleet" and its two largest oil companies, Rosneft and Lukoil [1].
Treasury Secretary Scott Bessent stated that the 30-day reprieve for India would "not provide significant financial benefit" to the Russian government, as it applies only to Russian oil stranded on tankers after no customer could be found. Analysts estimate this could involve approximately 125 million barrels of crude [1]. Bessent described the measure as a "stop-gap" intended to alleviate pressure caused by Iran's attempt to "take global energy hostage" [1]. Despite the recent price increases, Russian oil continues to trade at a considerable discount to Brent, though it is now well above the $59 per barrel benchmark previously assumed [1].
CONCLUSION
The U.S. Treasury's temporary allowance for India to buy Russian oil is a direct response to the disruption in global energy markets caused by the Iran conflict and the closure of the Strait of Hormuz. This measure has contributed to a sharp rise in oil prices and temporarily improved Russia's oil revenues, while aiming to stabilize gasoline costs for U.S. consumers. The market impact is high, with significant price movements and geopolitical implications.