As the Ukraine war rages on, Russia is actively working to circumvent the latest US sanctions in order to maintain India’s status as the world’s second-largest purchaser of Russian crude oil. This move comes as a response to the Trump administration’s attempts to coerce India into halting its reliance on the heavily discounted Russian oil.
Since the outbreak of the conflict, India has become a crucial market for Russian crude, which has been significantly discounted due to the impact of Western sanctions. However, the US has ramped up pressure on India, imposing punitive tariffs and threatening to withdraw from several India-led global initiatives over its continued purchase of Russian oil.
Despite these threats, India has remained steadfast in its position, asserting that its energy policies are a sovereign issue and will not be dictated by third countries. Trade negotiations between the US and India have since failed to reach any agreement.
Industry analysts suggest that Russia has already begun reorganising its supply chain to allow countries like India to circumvent the US sanctions. A notable loophole in the sanctions allows refineries to continue purchasing Russian oil, as long as it is not supplied by Rosneft or Lukoil, the two largest Russian oil exporters.
“It looks like the new players are emerging, which is a sign that Russia is already trying to reorganise the supply chain,” said Homayoun Falakshahi, the head crude oil analyst at Kpler. “Obviously the Russians are not going to sit and just watch the sanctions take effect, they will try to bypass them as much as they can.”
Despite the initial impact of the sanctions, which saw India’s imports of Russian oil drop from an average of 1.7 million barrels per day to around 1.2 million barrels per day in December, experts believe this is just a temporary setback. Four out of India’s seven largest oil refineries are still primarily running on Russian crude, and the discount on Russian oil remains too attractive for Indian refiners to ignore.
“The discount is just too attractive for the Indian refiners not to buy the oil,” said June Goh, a senior oil market analyst for Sparta Commodities. “We expect that imports, at least by India’s public sector, will soon return to the levels seen previously.”
The only exception has been Reliance, India’s biggest private oil company, which has publicly declared it will no longer import Russian crude into its Jamnagar refinery. This move is likely in response to both US and EU sanctions, as Reliance exports a significant amount of diesel and jet fuel to the EU, one of its largest markets.
As Reliance seeks alternative sources of crude, analysts suggest that the recent developments in Venezuela, where the US has captured President Nicolás Maduro, could present a well-timed opportunity for the conglomerate. According to reports, Reliance is among the companies in talks with the US for authorization to resume purchases of Venezuelan oil, which India had previously exported before sanctions were brought in.
Overall, it appears that Russia’s efforts to reorganise its supply chain and the continued attractiveness of its discounted oil are likely to ensure that India’s reliance on Russian crude remains largely uninterrupted, despite the latest US sanctions.
