Trump ends Iran oil waiver after fresh US strikes: How the move could impact India's fuel supply?

Washington: The administration of US President Donald Trump has withdrawn, with immediate effect, the oil sanctions waiver that had allowed the purchase of Iranian energy without triggering American sanctions.

The decision was announced on Tuesday following a fresh round of US military strikes on Iran in response to attacks on commercial vessels in the Strait of Hormuz. The move comes only weeks after Washington and Tehran agreed to halt hostilities under a Memorandum of Understanding (MoU).

US launches fresh strikes on Iran

The US Treasury confirmed that the sanctions waiver had been revoked on the same day that American forces resumed military operations against Iran.

According to US officials, the strikes were carried out in retaliation for attacks on three commercial ships travelling through the Strait of Hormuz. Washington said the operation was intended to impose costs on Tehran for targeting civilian shipping in one of the world's busiest maritime trade routes.

The latest escalation follows a temporary easing of tensions after the United States and Iran announced an MoU to end months of conflict.

US says waiver depended on Iran's conduct

While announcing the withdrawal of the general licence, a US official said the arrangement had always been conditional on Iran's behaviour.

"As President Trump and the administration have repeatedly affirmed, the MoU in effect with Iran is entirely performance-based. Iran will only reap benefits if they exhibit good behavior," the official said.

The waiver had been introduced in late June and was originally due to remain valid for 60 days until 21 August before Tuesday's decision brought it to an immediate end.

US Central Command accuses Iran of violating ceasefire

Earlier in the day, US Central Command described Iran's actions as both "unwarranted" and "dangerous", saying they amounted to a breach of the ceasefire.

In a post on X, the command said:

"US Central Command forces have begun launching a series of powerful strikes against Iran to impose heavy costs for targeting and attacking commercial shipping crewed by innocent civilians in an international waterway. The US strikes are in response to Iranian attacks on three commercial vessels that were transiting the Strait of Hormuz. Iran's demonstrated aggression was unwarranted, dangerous, and a clear violation of the ceasefire."

One of the ships reportedly targeted during the Iranian attacks was the Qatari vessel Al-Rekayyat, which was carrying energy shipments to India.

Waiver had significance for India's energy imports

The now-revoked general licence had been viewed as particularly important for countries such as India, which had relied heavily on Iranian crude before US sanctions were imposed.

When the waiver was announced, Prashant Vashisht, Senior Vice President at credit ratings agency ICRA, explained why Iranian oil remained attractive for Indian refiners.

"Iranian crude made up about 10.5% of India's total crude oil imports in 2018. And historically, Iranian crude sellers have given a longer credit period of 60 to 90 days as against 30 by other crude producers. Also, it is obviously geographically more proximate than a country like Venezuela. So Indian refiners would benefit because of these reasons. Iranian energy is well suited for purchases by India," he had told HT.

He also pointed to supply concerns in the global oil market.

"Crude oil is in short supply. Around 10-11 million barrels of oil a day were stuck in the Strait of Hormuz. As per the International Energy Agency, 4 million barrels per day has been made up by strategic reserves being allowed to flow into the market. I think India would be buying a lot of crude wherever it can get it," he had added.

Background to the sanctions waiver

In March this year, the Trump administration issued two separate 30-day licences allowing purchases of previously sanctioned Russian and Iranian energy.

The US Treasury introduced those waivers in an effort to ease pressure on global energy prices after the United States and Israel launched military strikes on Iran in late February.

However, when the licence allowing purchases of Iranian energy expired in April, Washington chose not to renew it. The fresh waiver announced in late June had been expected to remain in force until 21 August before it was revoked on Tuesday following the latest military escalation in the Strait of Hormuz.