America Bans Russian Oil Companies! India will now have to change its source of purchase of oil, knowing what the options may be

Following US sanctions against two Russian oil producing companies, Indian refiners may increase their purchases of crude oil from West Asia, Latin America and the US to compensate for the decline in crude oil imports from Russia. On October 22, the US government imposed sanctions on Russia’s two largest crude oil producers, Rosneft and Lukoil. This ban prohibited all US entities and individuals from doing business with these companies. Non-US companies that do business with sanctioned Russian oil companies or their subsidiaries could also face fines. All existing transactions must be completed by 21 November. The US Treasury Department said that all existing transactions involving Rosneft and Lukoil must be completed by November 21. Currently, Russia accounts for about one-third of India’s crude oil imports. Russia exported an average of about 1.7 million barrels of crude oil per day to India this year, of which about 1.2 million came directly from Rosneft and Lukoil. Most of this oil was bought by private refineries Reliance Industries Limited and Nayara Energy. The share of state refineries is much less. Reliance may be the first Indian company to stop importing crude oil from Russia. Kepler Principal Research Analyst (Refining and Modelling) Sumit Ritolia said till November 21, crude oil imports from Russia are expected to be between 16-18 lakh barrels per day, but after that there may be a decline in direct imports from Rosneft and Lukoil. Obviously, Indian refiners want to avoid any risk of US sanctions. Reliance Industries, which has a 25-year contract with Rosneft to buy up to 5,00,000 barrels of crude oil per day, could be the first company to stop importing oil from Rosneft, sources said. Nayara Energy has little choice With supplies from elsewhere dwindling due to EU sanctions, Nayara Energy has little choice. The company is currently completely dependent on Russian oil. Refineries will nevertheless continue to receive Russian-grade oil through third-party intermediaries, but this will be done with extreme caution,” Ritolia said. To compensate for the decline in direct imports from Russia, Indian refiners may increase purchases from West Asia, Brazil, Latin America, West Africa, Canada and the United States. India’s import bill will increase Prashant Vashishtha, senior vice president and associate group head, corporate ratings at ICRA Ltd, also expressed similar views, saying moving away from Russian oil would increase India’s import bill. “US sanctions imposed on some Russian crude producers are likely to affect India’s oil purchases as these suppliers account for around 60 percent of total purchases,” he said. He further said, “Although India can replace Russian oil with crude oil from West Asia and other geographies, the crude oil import bill will rise.” Vashishtha said that buying crude oil at market price instead of Russian oil would increase the import bill by a little less than two per cent year-on-year.