Indian refineries are set to drastically cut imports of Russian oil to comply with new US sanctions on two top Russian producers, potentially clearing a major hurdle of a trade deal with the United States, industry sources said on Thursday. The change comes as India faces 50% tariffs on its exports to the US – half of which would be in retaliation for Russian oil purchases – and is negotiating a potential trade deal that could bring those tariffs in line with Asian counterparts in exchange for reducing crude imports from Moscow.
Can India drastically cut oil purchases from Russia to avoid sanctions?
India may drastically cut crude oil imports from Russia, its largest supplier, following new sanctions imposed by the US and Europe, according to a Reuters report on Thursday. The country’s biggest private buyer of Russian oil, Reliance Industries Ltd, plans to drastically cut or completely halt its crude imports from Moscow, two refining sources told Reuters. Government refineries are also reevaluating their procurement plans to ensure compliance with the new restrictions. The decision comes after the US and its allies imposed additional sanctions on major Russian energy companies, including Rosneft and Lukoil, over the ongoing conflict in Ukraine. Britain also imposed sanctions on both companies last week, while the European Union approved a 19th round of sanctions that also includes a ban on imports of Russian liquefied natural gas (LNG).
Oil prices rise after India reviews purchases
Oil prices rose nearly 3% on Thursday after traders reacted to India’s plan to review oil imports from Russia. Brent crude futures rose $1.94, or 3.1%, to $64.53 a barrel by 0428 GMT, while U.S. West Texas Intermediate (WTI) crude rose $1.89, or 3.2%, to $60.39 a barrel.
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Analysts said the surge was due to fears that tighter sanctions and a decline in Russian exports could disrupt global supply chains. “President Trump’s new sanctions on Russia’s biggest oil houses are directly aimed at curbing the Kremlin’s war revenues – a move that could reduce the physical flow of Russian barrels and force buyers to redirect their volumes to the open market,” said Priyanka Sachdeva, senior market analyst at Philip Nova, according to Reuters. He further said that if India cuts oil purchases from Russia under US pressure, “we could see Asian demand shifting towards US crude, which could push up oil prices across the Atlantic.”
Indian refiners are reevaluating supply chains
According to Reuters, India’s state-owned refiners have begun a review of their supply arrangements to ensure that none of their crude comes directly from Russian oil giants Rosneft or Lukoil.
Privately owned Reliance Industries, which has been one of the largest importers of Russian oil since 2022, is reportedly planning to adjust its purchasing pattern in line with the policy direction of the Indian government. Reliance intends to “sharply cut” imports due to the growing list of Western sanctions, sources told Reuters.
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India’s total imports of Russian crude had increased in the past two years after Western buyers cut purchases, providing cheaper oil to Indian refiners. However, due to tighter sanctions and increasing pressure from the US, Indian refiners may now turn to alternative suppliers from the Middle East and Africa.
Market trend remains uncertain
Despite the immediate rise in oil prices, some market experts are cautious about the long-term impact of these sanctions on global supply and demand.“The new sanctions are certainly increasing tensions between the US and Russia, but I think the surge in oil prices is a knee-jerk reaction rather than a structural change,” said Claudio Galimberti, director of global market analysis at Rystad Energy, according to Reuters.
He said that previous sanctions have not caused any significant reduction in Russia’s oil production or revenues. “Almost all the sanctions imposed on Russia over the past three and a half years have had no significant impact on the amount of oil produced by the country or on oil revenues,” Galimberti said. He further said that some Indian and Chinese buyers continue to buy Russian oil despite the sanctions.