What led an India-bound Iranian crude tanker to reroute to China | India News

According to ship-tracking firm Kepler, the ship is now signaling Dongying in China instead of Vadiner.There is no guarantee that the destination shown on the ship’s Automatic Identification System (AIS) transponder is final, and may still change during transit.“An Iranian crude ship ‘Ping Shun’ which was en route to India’s Vadinar for the past three days, has declared India as its declared destination near arrival and is now indicating China,” said Sumit Ritolia, Lead Research Analyst at Refining and Modelling, a commodity market analysis firm.According to Ritolia, the rerouting appears to be linked to tightening payment terms.“The shift in Ping Shun’s destination appears to be payment-related, with sellers tightening terms, moving away from the earlier 30-60 day credit window toward upfront or near-term settlement.”It is not clear who are the actual sellers and buyers of crude oil.The development comes at a time when Indian refiners are exploring opportunities to buy some cargoes of Iranian oil at sea after the US lifted a ban on such purchases for 30 days last month.That waiver window expires on April 19.While the waiver has already allowed countries to buy Iranian oil at sea, the key challenge remains payment.Iran remains out of SWIFT (Society for Worldwide Interbank Financial Telecommunications), the global banking messaging system used by financial institutions to securely send and receive transaction information.Purchases from Iran were previously made in euros through Turkish banks, but that option no longer exists.Iran was cut off from the SWIFT system in March 2012 following European Union sanctions over its nuclear program. Further obstacles came after the US reimposed sanctions in 2018, sharply limiting Tehran’s ability to pay for oil, conduct international trade and access foreign exchange reserves.The Ping Shun is estimated to be carrying about 600,000 barrels of crude oil that was loaded from Kharg Island on March 4. According to Kpler, its announced ETA until Vadina was April 4.Vadina is home to Rosneft-backed Nayara Energy’s 20 million tonne-a-year refinery.If delivered, the cargo would have been the first Iranian crude shipment to India since 2019.India was once a major buyer of Iranian oil, importing significant quantities of Iranian light and Iranian heavy grades due to strong refinery capacity and favorable commercial terms.But after sanctions tightened in 2018, imports stopped in May 2019, with those volumes replaced by crude from the Middle East, the United States and other sources.At its peak, Iranian crude oil accounted for 11.5 percent of India’s total oil imports.India imported around 518,000 barrels of oil per day from Iran in 2018 That fell to 268,000 barrels per day between January and May 2019, when the United States granted concessions to some buyers. Since then there have been no further imports.India’s oil ministry has so far maintained that any decision on resuming Iranian crude purchases will depend on techno-commercial feasibility.According to estimates, about 95 million barrels of Iranian oil are currently in ships at sea. About 51 million barrels of this can be sold in India, while the rest is considered more suitable for buyers in China and Southeast Asia.Ritolia said the recent rerouting shows how financial terms are becoming central to the movement of Iranian crude.“While such mid-voyage destination changes are not unprecedented with Iranian crude, they highlight the increasing sensitivity of trade flows to financial terms and counterparty risks,” he said.“If the payment issues are resolved, the cargo may still go to Indian refineries. However, the episode illustrates how commercial terms are becoming as important as logistics in determining the flow of Iranian crude to countries other than China.”