How New US Sanctions Could Shake Up India’s Access to Russian Oil

India’s Russian Crude Oil Imports: Navigating New Sanctions

India’s imports of Russian crude oil are poised for a significant shift as new U.S. sanctions take effect. Experts believe that while these imports won’t stop completely, they could drop sharply in the coming months.

The sanctions on major Russian oil companies like Rosneft and Lukoil took hold on November 21. This change effectively turns oil linked to these companies into what analysts refer to as “sanctioned molecules.” India has been buying an impressive 1.7 million barrels per day (bpd) from Russia this year. In November, the country expected to receive between 1.8 and 1.9 million bpd, with refiners eager to take advantage of discounted prices. However, analysts forecast a decline to roughly 400,000 bpd by December and January.

Historically, India has relied on Middle Eastern oil. But following Russia’s invasion of Ukraine in February 2022, the scenario changed drastically. With Western sanctions pushing down demand in Europe, Russian oil became available at steep discounts. Consequently, Russian crude imports skyrocketed from less than 1% to nearly 40% of India’s total crude oil imports within a short time. This past November, Russia was India’s top supplier, accounting for about one-third of all crude oil coming into the country.

Sumit Ritolia, a lead research analyst at Kpler, comments on the situation. He explains that Indian refiners will likely experience a marked reduction in Russian crude in the near term. Some well-known firms like Reliance Industries and HPCL-Mittal Energy Ltd have already paused their imports. Nayara Energy is the only major firm still importing Russian crude, as it has limited options due to other restrictions.

An interesting point Ritolia makes is that while specific companies are targeted, the sanctions don’t ban all Russian oil. Non-designated producers like Surgutneftegaz can still sell oil to Indian refiners, provided they don’t involve any sanctioned entities or vessels.

What does this mean for Indian fuel prices? The discounted Russian crude has helped Indian refiners maintain profits and stabilize retail petrol and diesel prices, despite fluctuations in global markets. India is heavily reliant on foreign oil, with about 88% of its needs met through imports.

Looking ahead, readiness for uncertainty is key. The situation is evolving rapidly, and companies are adjusting their supply chains. For instance, Reliance Industries confirmed it ceased importing Russian oil into its export-focused refinery to comply with EU regulations. From December 1, all products from this facility will be sourced exclusively from non-Russian crude.

Ritolia highlights that the future landscape will depend on how strictly these sanctions are enforced. If enforcement is tight, it could further suppress the import volumes. However, if enforcement is relaxed, there may be room for a recovery, especially through intermediaries.

In conclusion, India’s import strategies are entering a new phase marked by uncertainty. The country may still continue to import Russian crude, albeit through less transparent channels. Despite the recent changes, the appetite for discounted oil remains strong as India prioritizes affordability and energy security.

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