The comprehensive sanctions package introduced earlier this month by the US targeting Russia’s oil trade has already disrupted the near-term supply of Russian crude to Indian refiners. These refiners are struggling to secure adequate cargoes from Moscow, prompting them to seek alternative sources—primarily in the Middle East—to replace the volumes previously supplied by Russia, which is currently India’s largest crude supplier.
From being a marginal oil supplier to India prior to the war in Ukraine, Russia is now India’s biggest supplier of crude.(Representational Image)
Bharat Petroleum (BPCL), India’s second-largest public sector refiner, is facing challenges in obtaining sufficient Russian oil cargoes for March delivery, according to Vetsa Ramakrishna Gupta, the company’s Director (Finance), during a call with analysts on Thursday. Officials from other Indian refining companies also confirmed difficulties in securing Russian oil deliveries beyond February, citing the impact of the sanctions, which have significantly disrupted the tanker fleet transporting Russian crude.
Nevertheless, industry experts assert that the global market has sufficient oil supply, and replacing the lost volumes of Russian crude should not pose a significant challenge.
“Crude availability is not an issue…Only the commercial benefits of (discounted) Russian crude may not be available,” Gupta mentioned that the supply disruption from Russia is expected to be "a temporary issue" that can be addressed through some market rebalancing.
As per his analysis, the share of Russian crude in BPCL’s import basket could drop significantly to 20% in March, down from 31% during the December quarter.
On January 10, the United States imposed sanctions on 183 tankers—a substantial portion of the "shadow fleet" that has facilitated Russian oil exports to key markets like India and China. Additionally, sanctions were placed on two Russian oil giants, Gazprom Neft and Surgutneftegas, as well as Russian insurance firms and other entities involved in the country’s oil sector and trade.
The Biden administration, in its final days, announced these sanctions at a time when Indian refiners had begun sourcing Russian oil for March deliveries.
These measures are the latest in a series of Western efforts to curb Russia’s oil revenues, which they allege are being used to fund Moscow’s war in Ukraine. According to the U.S. Department of the Treasury, the move significantly increases the sanctions risks associated with trading Russian oil. Many of the sanctioned vessels had been transporting oil to India and China.
Indian refiners are now turning to their traditional suppliers in West Asia to fill the gap left by reduced Russian oil imports, according to industry officials and trade sources. They plan to boost purchases under long-term agreements and seek additional spot market cargoes from Middle Eastern suppliers. Efforts are also underway to secure more oil from African and U.S. markets.
Before the Ukraine war, Russia was a minor oil supplier to India. However, after Western nations began to avoid Russian oil, Moscow became India’s largest supplier by offering steep discounts. In 2024, Russian oil accounted for nearly 38% of India’s total crude imports, according to tanker data.
Prior to the conflict, Iraq, Saudi Arabia, and the UAE were India’s top three crude oil suppliers. They now occupy the second, third, and fourth positions, respectively. India, as the world’s third-largest crude oil consumer, relies on imports for over 85% of its oil needs.
Indian government sources have stated that the country’s refiners will reject deliveries on sanctioned vessels, except for those booked before January 10. These cargoes can be delivered using the sanctioned vessels until March 12, as per the wind-down period provided by the U.S. for honoring existing contracts.
While India is not part of the sanctions regime against Russia, New Delhi has generally avoided violating U.S. sanctions to prevent secondary penalties. Although India-Russia oil trade may continue largely unaffected during the wind-down period, industry experts anticipate a decline in Russian oil supplies to India in the near future.
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