Indian Oil Corporation (IOC) and other Indian oil firms may not completely halt purchases of Russian crude as recent sanctions target specific Russian suppliers, not the oil itself – a scenario that opens the possibility of flows to continue through non-sanctioned entities.
Officials said four Russian oil companies have been sanctioned so far, but the largest supplier to India, Rosneft – which handles around 45 per cent of flows – is not an actual producer but an aggregator. Crude aggregation from fields in Russia can be carried out by other non-sanctioned entities, allowing supplies to continue.
Indian refiners have not placed any new orders for Russian oil after the US last week slapped sanctions on Moscow’s top two crude exporters as they assess the changed scenario to ensure not faulting with any international commitments.
Purchase of Russian oil, they said, has not been sanctioned. The US has imposed sanctions on Russia’s Rosneft and Lukoil, making it impossible for commercial dealings with them.
However, Russian crude, which is processed in refineries to make fuels like petrol and diesel, offered by any non-sanctioned entity can be considered, they said.
This understanding was also reflected by IOC Director (Finance) Anuj Jain in a post-earnings analyst call on Tuesday.
“We are absolutely not going to discontinue (buying Russian crude) as long as we are complying with the sanctions. Russian crude is not sanctioned. It is the entities and the shipping lines which have got sanctions,” he said. “If somebody comes to me with a non-sanctioned entity, and the (price) cap is being complied with, and the shipping is okay, then I will continue to buy it.”
The US last week imposed sanctions on Rosneft and Lukoil, in a bid to pressure Moscow into ending its war on Ukraine. Other major producers, Surgutneftegas PAO and Gazprom Neft, were blacklisted earlier.
Officials said the Indian firms are weighing their options to understand how much they can buy from non-sanctioned entities in Russia.
They don’t want to turn away from Russian crude as it offers economic advantage – it is available at a discount (now ranging between $3.5 to $5 per barrel) to other internationally traded grades. They won’t leave even a dollar advantage as long as they are compliant with sanctions, officials said.
In 2024, Rosneft supplied nearly 45 per cent of 1.6-1.8 million barrels per day of Russian oil coming to India. Rosneft produced very little of those volumes and rather sourced it from other producers in Russia.
And so if some other non-sanctioned entity were to do that job, Indian companies would be able to do business with them.
Lukoil, which has its own production, accounted for 19.5 per cent of supplies to India. Surgutneftegas supplied 12.5 per cent and Gazprom Neft 6.4 per cent. Other supplies sold 17 per cent of the crude to India.
Most of the Russian volumes were bought by private refiners, Reliance Industries Ltd and Nayara Energy, with smaller allocations to state-owned refiners.
Reliance, which has a 25-year term contract with Rosneft to buy up to 5,00,000 barrels per day of crude, may be the first company to stop Russian supplies as it has heavy exposure in the US and risks attracting sanctions if it continues to trade, industry sources said.
Nayara, which is currently dependent solely on Russian oil after supplies from elsewhere dried up due to sanctions by the European Union, has very few options.
Another factor going in favour of the state-owned oil refiners is that they do not have any direct contract with Rosneft or Lukoil and have been buying Russian oil through intermediary traders, mostly European (who are out of the sanctions net), sources said.
State-owned refiners typically buy Russian oil through tenders. In these tenders, oil traders, mostly European or ones based in Dubai and Singapore, who had purchased oil from Russian entities, participated.
These traders have not been sanctioned by the US, sources said, adding that European Union sanctions, too, had not targeted these traders.
And even if some traders shy away from picking Russian volumes, Moscow is capable of overnight resurrecting new ones with Dubai registration, sources said, adding that these traders can buy oil from Russian firms and sell to refiners such as those in India and China.
“The measures by the Trump administration are ‘half-hearted’,” a source involved in the business said.
“For months, US President Donald Trump has resisted pressure from US lawmakers to impose energy sanctions, and even now, the ones who do the bulk of the trade are out of its net.”
Another source said the markets are somehow not buying into Trump’s latest sanctions.
“If sanctions were so impregnable, international oil prices would have jumped at least $5-10 per barrel on news of such large volumes going out of the market. Instead, what we saw was just a $2 per barrel increase and has stabilised since, implying the market believes not all of the oil that is exported from Russia is going anywhere.”
