New US Sanctions Jeopardize India's Access to Russian Oil Supplies
According to reports, India's imports of Russian crude oil, which serves as the raw material for fuels such as petrol and diesel, will significantly decrease in the short term but will not stop completely as new US sanctions on Moscow's leading oil exporters come into full effect.
US sanctions on Rosneft and Lukoil, along with their majority-owned subsidiaries, became effective on November 21, effectively transforming crude associated with these companies into a "sanctioned molecule."
India's crude oil purchases from Russia, averaging 1.7 million barrels per day (bpd) this year, stayed stable before the cutoff, with November deliveries estimated at 1.8-1.9 million bpd, as refiners optimize discounted buys. However, flows are projected to significantly decrease in December and January, with analysts anticipating short-term reductions to approximately 400,000 bpd.
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Historically dependent on Middle Eastern oil, India drastically boosted its imports from Russia after the Ukraine invasion in February 2022.
Western sanctions and decreased European demand resulted in Russian oil being sold at significant discounts. Consequently, India's imports of Russian crude rose sharply from less than 1 percent to almost 40 percent of its overall crude oil imports in a brief period. In November, India’s primary supplier remained Russia, accounting for roughly one-third of the nation’s total crude oil imports.
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"We anticipate a significant reduction in Russian oil shipments to India in the short term, especially during December and January. Loadings have already decelerated since October 21, yet it's still premature for conclusive judgments, considering Russia's ability to utilize intermediaries, shadow fleets, and alternative financing," stated Sumit Ritolia, Lead Research Analyst, Refining & Modeling, Kpler.
The sanctions have led to companies such as Reliance Industries, HPCL-Mittal Energy Ltd, and Mangalore Refinery and Petrochemicals Ltd ceasing imports for the time being.
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The sole exception is Nayara Energy, supported by Rosneft, which heavily relies on Russian crude after global supplies were virtually halted due to European Union sanctions imposed on it.
"Based on the current understanding, no Indian refiner, other than Nayara's already-sanctioned Vadinar facility, is likely to take the risk of dealing with OFAC-designated entities, and buyers will need time to reconfigure contracts, routing, ownership structures, and payment channels," Ritolia says.