New Delhi: Indian refiners are gearing up to buy more crude oil from the Middle East, Latin America, and the US. This shift is in response to recent US sanctions against two major Russian oil companies, Rosneft and Lukoil. The sanctions, announced by the US government on October 22, prevent American companies and individuals from doing business with these firms. Non-US companies could also face penalties for trading with them. The US Treasury has set a deadline for unwinding existing deals by November 21.
Currently, Russia supplies about a third of India’s crude imports—around 1.7 million barrels per day (mbd)—with around 1.2 mbd coming directly from Rosneft and Lukoil. Private refiners, such as Reliance Industries and Nayara Energy, buy the majority of these shipments.
After the sanctions, experts predict that Russian crude flows will continue at around 1.6 to 1.8 mbd until the deadline. However, direct imports from Rosneft and Lukoil may drop sharply afterward, as Indian refiners seek to avoid risks related to the US sanctions, according to Sumit Ritolia, a lead analyst at Kpler.
Reliance has a long-term contract with Rosneft for up to 500,000 barrels a day and could be the first affected by this shift. Nayara, heavily reliant on Russian oil due to previous sanctions, has limited options for sourcing alternatives.
Despite the challenges, Ritolia notes that refiners might still obtain Russian oil through third-party intermediaries, although they will proceed with caution. To make up for reduced Russian imports, Indian refiners will likely start looking to sources in the Middle East, Brazil, West Africa, and the US. Yet, higher transportation costs may complicate these efforts.
Prashant Vasisht from Icra Limited highlights that moving away from Russian oil will likely increase India’s import costs. He estimates that this shift could raise the overall import bill by less than 2% annually. Russia previously accounted for about 60% of India’s crude oil purchases, emphasizing the scale of the adjustment required.
According to the International Energy Agency, Russia exports around 7.3 million barrels a day, making up about 7% of global oil consumption. The latest US sanctions make it difficult for companies facilitating the majority of these exports, further complicating international trade.
Historically, Indian state-owned refiners have been cautious in their dealings with Russian suppliers. They are expected to minimize direct transactions with sanctioned firms to avoid exposure to secondary sanctions. Yet, they will likely continue indirect purchasing when possible.
The largest Russian oil importer, Reliance, faces immediate hurdles due to the impact of the sanctions on its long-term contracts. It may need to adapt quickly, shifting to third-party sourcing while ensuring compliance with regulatory demands. A potential scenario is that Reliance could pause direct purchases from Rosneft or Lukoil, leading to a considerable drop in Russian oil imports after the sanctions take effect. However, as new intermediaries emerge, imports might gradually stabilize by mid-2026.
Nayara Energy is already under pressure due to its heavy reliance on Russian crude and may continue its usual sourcing unless pressured by the Indian government. Overall, Indian refiners are expected to broaden their import sources, increasing shipments from countries like Brazil, Colombia, and the Middle East, while still maintaining some Russian imports through intermediaries.
Interestingly, despite the ongoing turbulence, analysts believe that a complete ban on Russian oil imports by India is unlikely, given the favorable margins and geopolitical considerations in play. In the absence of sanctions directly against Indian refiners, Russian crude is expected to continue flowing, albeit through more complex structures.
The evolution of this situation highlights the intricate balance between global politics and energy needs, revealing how quickly markets can shift in response to regulatory changes. As refiners adapt, observers will be watching closely to see how these dynamics unfold in the coming months.
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INDIA OIL IMPORTS FROM RUSSIA, TARIFF WAR, US SANCTIONS RUSSIA OIL PRODUCERS, INDIA BUYING RUSSIA OIL, INDIAN REFINERS TO BUY MORE CRUDE FROM MIDDLE EAST US TO REPLACE RUSSIAN OIL
