Sign in Subscribe
Petroleum

India to Cut Back on Russian Oil Imports Amid Rising Global Prices and US Sanctions

Strategic Insights

— 2 min read

India, the second-largest crude oil importer in the world, is poised to significantly reduce its Russian oil imports as US sanctions on two major Russian oil producers take effect. The move is in response to the significant increase in global crude prices and shifting US-India trade dynamics. Reliance Industries, led by billionaire Mukesh Ambani, is set to close the tap on Russian crude imports, and public sector oil refiners such as Indian Oil Corporation are also expected to follow suit.

Key Takeaways:

  • Reliance Industries, India's largest buyer of Russian crude, will stop purchasing oil from Russia after November 21, following the US treasury department's directive to impose sanctions on Russian oil firms Rosneft and Lukoil.
  • The sanctions prohibit entities, American or foreign, from engaging in commercial dealings with the blacklisted firms, which can result in civil or criminal penalties.
  • As of October 22, India's oil imports from Russia have been around 1.7 million barrels per day, with Reliance accounting for almost half the purchase.
  • Reliance operates the world's largest single-site refinery in Jamnagar, Gujarat, and a sizable chunk of the company's output is meant for export.
  • The sanctions will impact oil prices globally, with key benchmark Brent soaring to $66 a barrel, a 5% increase in trade on Thursday.
  • Nayara, partly owned by Rosneft, will be hit hard by the sanctions, and three Indian refineries that have processed and re-exported Russian crude the most are Jamnagar of Reliance, Vadinar of Nayara, and New Mangalore of MRPL.
  • The US has imposed a 25% tariff on Indian exports as punishment for buying Russian oil, taking the total tariff volume to 50%, one of the highest in the world.
  • Indian buyers were enjoying a discount of about $2-3 per Russian barrel before the sanctions took effect.

Statistics:

  • India's oil imports from Russia: 1.7 million barrels per day (as of October 22)
  • Reliance's share of Russian crude imports: Almost 50%
  • Global crude prices: $66 a barrel (Brent benchmark)
  • US tariff on Indian exports: 25% (total tariff volume: 50%)
  • Discount on Russian barrel: $2-3 per barrel

Sources:

  • Reuters: "Oil slips on US sanctions on Russian firms"
  • "US imposes sanctions on Russian oil firms, further tightening squeeze on Moscow's earnings"
  • "India's oil imports from Russia were valued at approximately $1.17 billion in the July-September period"
  • "The US has imposed a 25% tariff on Indian exports, taking the total tariff volume to 50%."

Read more