How US sanctions on Russian oil exporters will impact India
What's the story
India's imports of Russian crude oil, a key source for fuels such as petrol and diesel, are likely to see a sharp decline in the near future. This is mainly due to new US sanctions on Moscow's top oil exporters coming into effect. The sanctions target Rosneft and Lukoil, along with their majority-owned subsidiaries, thus effectively turning crude linked to these firms into a "sanctioned molecule."
Import reduction
India's Russian crude imports to drop significantly
India's average crude oil imports from Russia this year have been around 1.7 million barrels per day (bpd). However, with the new sanctions coming into play, these figures are expected to drop significantly in December and January. Analysts predict that near-term declines could bring imports down to about 400,000bpd. Despite this, India has continued its Russian crude purchases for November at an estimated 1.8-1.9 millionbpd as refiners cash in on discounted prices before the sanctions fully kick in.
Market shift
India's shift to Russian crude post-Ukraine invasion
India, which has long relied on Middle Eastern oil, has been shifting toward Russian crude since the Ukraine invasion in February 2022. This is because Western sanctions and a drop in European demand have made Russian oil available at steep discounts. As a result, India's imports of Russian crude have jumped from less than 1% to nearly 40% of its total crude oil imports in no time.
Refinery response
Sanctions impact on Indian refiners
The US sanctions have already prompted companies like Reliance Industries, HPCL-Mittal Energy Ltd, and Mangalore Refinery and Petrochemicals Ltd to halt imports for now. The only exception is Rosneft-backed Nayara Energy which heavily relies on Russian crude after supplies from other countries were effectively cut off due to European Union sanctions. "No Indian refiner, other than Nayara's already-sanctioned Vadinar facility, is likely to take the risk of dealing with OFAC-designated entities," said Sumit Ritolia from Kpler.
Supply loophole
Non-designated Russian entities can still supply crude
The US sanctions target specific firms, not all Russian oil or producers. This means that crude supplied by non-designated Russian entities such as Surgutneftegaz, Gazprom Neft, or independent traders using non-sanctioned intermediaries can still be legally purchased by Indian refiners. "Russian oil itself is not sanctioned; the suppliers are," Ritolia said, adding that non-designated producers could legally step in to fill some of the gap created by restrictions on Rosneft and Lukoil.