>India is allowing state refiners to import Iranian oil with Tehran arranging tankers and insurance after firms including the country's top shipper Shipping Corp of India (SCI) halted voyages to Iran due to U.S. sanctions, sources said.
>New Delhi's attempt to keep Iranian oil flowing mirrors a step by China, where buyers are shifting nearly all their Iranian oil imports to vessels owned by National Iranian Tanker Co (NITC).
>The moves by the two top buyers of Iranian crude indicate that the Islamic Republic may not be fully cut off from global oil markets from November, when U.S. sanctions against Tehran's petroleum sector are due to start.
>New Delhi turned to the NITC fleet after most insurers and reinsurers had begun winding down services for Iran, wanting to avoid falling foul of the sanctions given their large exposure to the United States.
>Under a CIF arrangement, Iran would provide shipping and insurance, enabling Indian refiners to continue purchases of the country's oil despite the non-availability of cover from Western insurers due to the restrictions imposed by Washington.
>The move would benefit Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and MRPL, which plan to lift Iranian cargoes during the rest of the fiscal year ending on March 31.
>India wants to continue buying oil from OPEC member Iran as Tehran is offering almost free shipping and an extended credit period.
>State refiners, which drove India's July imports of Iranian oil to a record 768,000 barrels per day, had planned to nearly double oil imports from Iran in 2018/19.
This is a great deal for India and Iran.
If the EU accepted a similar deal, Trump's sanctions would crumble on the spot, and that would be the end of it (other than the resultant massive howls and threats).
Assuming the EU displays no backbone (which is highly likely), it's not too difficult to see potential for a major escalation.
The US could stop Iranian tankers on the open seas or perhaps even sink one, or threaten to sink one, an open act or war. Of course sanctions are an act or war in and of themselves.
There is a possibility China or Russia might come to the defense of Iran, but they have their own problems with tariffs and sanctions respectively.
India could offer military protection.
All of these ideas may have a small likelihood, but the cumulative risk of a major accident is well above zero.
Meanwhile, until the sanctions are broken, we remain in the 100% absurd setup where one person gets to set sanction policy for the entire world.
Mike "Mish" Shedlock