An oil tanker carrying Iranian crude that was on course for India changed its declared destination to a Chinese port after coming quite close to Gujarat, according to ship tracking data Friday.

For nearly seven years now, India has not bought Iranian oil. This was to be the first delivery.

Eswatini-flagged tanker Ping Shun, which was approaching the Vadinar port in Gujarat, later signalled Dongying in China’s Shandong province as its destination, according to data from commodity market analytics firm Kpler.

Trade sources said payment-related issues could be the reason behind the diversion.

The tanker, carrying about  600,000 barrels of Iranian crude, had taken a path that was headed to Vadinar, and as of Thursday afternoon, it was indicating arrival at the Gujarat port between late Thursday and early Friday. Later, it took a  sharp turn to the south from its earlier course, and changed its declared destination to Dongying.

Amid the raging West Asia war, the US on March 21 suspended for a month the sanctions on Iranian crude already loaded on tankers in a bid to allow as many barrels of oil as possible to flow into the international market to improve the global oil supply situation and curb spiraling crude oil prices.

The waiver from Washington was similar to the one issued for Russian oil earlier in March. India hasn’t imported Iranian crude since May 2019 due to reimposition of US sanctions on Tehran by the first Trump administration.

Changes in declared destinations are not uncommon for dark fleet tankers involved in sanctioned oil trade; it can be used as a tactic to avoid detection and keep the actual intended destination under wraps.

In this case, however, tanker Ping Shun’s initial course suggested it was headed to Vadinar. It would have taken a very different course had its actual destination been China all along, according to trade sources.

Moreover, with the sanctions waiver announced by the US, such tactics are not really required by vessels carrying Iranian oil. It was not clear which Indian refiner was the intended buyer of the Iranian crude being hauled by Ping Shun.

According to the general licence issued by the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury on March 21, transactions related to the sale, delivery, or offloading of crude oil and petroleum products of Iranian origin – loaded on any vessel, including tankers sanctioned by the US, as of 12.01 eastern daylight time (9.31 am India time) on March 20 – are authorised until April 19.

Data indicates that Iranian crude was loaded on Ping Shun around March 4 at Iran’s main oil facility of Kharg Island, which means that the crude on this tanker was not under US sanctions.

Sumit Ritolia, manager, modelling & refining at Kpler, said, “Per market sources, the shift 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. While such mid-voyage destination changes are not unprecedented with Iranian crudes, they highlight the increasing sensitivity of trade flows to financial terms and counterparty risk.”

“If the payment issues are resolved, the cargo could still make its way to an Indian refinery. However, the episode underscores how commercial terms are becoming as critical as logistics in determining Iranian crude flows to other countries apart from China,” he said.

Although the US has provided a sanctions waiver for Iranian crude on water, commercial terms and payment-related challenges are still being seen as hurdles in Iranian oil trade with countries other than China, which has been the destination for most of Iran’s oil exports for years now.

Iran and its banks remain out of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the main messaging network through which international payments are initiated. Most banks and financial intermediaries are still reluctant to get involved in transactions with the Iranian financial system.