New Delhi: US sanctions against Rosneft PJSC and Lukoil PJSC, the two biggest suppliers of Russian oil, are likely to force Indian refiners to buy from non-discounted West Asian and other sources, increasing the country’s import bill, analysts said. “The US sanctions against certain Russian crude oil producers are likely to impact purchases by India as these suppliers accounted for around 60% of the volumes purchased,” said Prashant Vasisht, senior vice president and associate group head, corporate ratings, Icra Ltd. said. Vasisht sees the replacement of Russian oil by market price crude increasing the country’s oil import bill by 2%. Given India’s crude imports worth $137 billion in FY25, this would amount to an increase of $2.7 billion. Russia has been the largest supplier of crude oil to India since FY23, accounting for about 35% of the country’s total imported crude oil. However, the US Treasury Department issued sanctions against Rosneft and Lukoil overnight, setting a November 21 deadline for companies to stop doing business with these Russian oil producers. This comes as a big blow to India as the two companies contribute about 1 million barrels of oil per day (bpd) out of the total 1.8 million bpd coming from Russia. Russian oil flows to major Indian refineries are expected to drop to near zero after the US sanctions, Bloomberg reported, citing unnamed senior executives at the refiners. Blacklisting Russia’s biggest producers would make it all but impossible for that supply to proceed, they said. Separately, PTI reported citing sources that Mukesh Ambani’s Reliance Industries Ltd, India’s biggest buyer of discounted Russian oil, plans to scale back Russian crude imports following new US sanctions against Moscow-linked firms. Indian refiners will largely offset the decline in supply from Russia through higher purchases from the spot markets, said Harshraj Aggarwal, executive vice president institutional equity research at Yes Securities. “Assuming that around 30% of crude input comes from Russia and an average discount of $2 per barrel, that translates to a discount of $0.6 per barrel, which would not come through.” Currently, discounts on Russian oil are in the range of $2-4 per barrel. “Availability is not so much a problem as the cost of oil in the world markets. Oil from West Asia, the Mediterranean, the USA and the like can come in; however, India may not be offered discounts by these suppliers as was the case with Russia,” says Deepak Mahurkar, partner Oil and Gas at PwC India. “This may increase the import bill, but the availability of oil to replace Russian crude will not be a major problem.” Trump’s Russia gambit Since Donald Trump took over as president of the US for the second time, his administration has been pressuring India to stop Russian oil imports, citing the money from energy purchases allowing Russia to finance the war in Ukraine. However, India has maintained that its energy procurement is based on the interest of its consumers and that it will buy oil from wherever it comes at affordable rates. Trump even slapped an additional 25% tariffs on India for buying Russian energy, taking the total levy on Indian goods to 50%, the highest in the world. The two nations are negotiating a bilateral trade agreement. Trump said on Wednesday (local time) that India would cut Russian oil imports by nearly 40% by the end of the year. “India, as you know, told me they will stop … it’s a process. You can’t just stop (buying oil from Russia).” Imports from Russia decreased last month. Data from global real-time data and analytics provider Kpler showed India’s imports of Russian crude stood at 1.6 million bpd in September, down about 5% from 1.69 million bpd in August. However, industry players suggest that this was due to commercial factors, as discounts fell to around $2 from $3 in August. India has already diversified its sourcing to around 40 countries in the last three years. “Conventional sources may want to compete and replace recent sources to regain their share of large-scale Indian oil purchases,” said Gaurav Moda, partner and energy sector leader at EY-Parthenon India. “This could open up new opportunities and dynamics with existing and/or previous suppliers to India’s advantage in the medium term.”
India stares at $2.7 billion hit as US sanctions two biggest Russian oil suppliers
