At least 3 recently-sanctioned tankers scheduled to supply Russian oil to India in coming weeks

While industry insiders do not anticipate any major problem with these specific deliveries as Washington has allowed 45 days for the newly-sanctioned tankers to offload crude oil, it is being seen as a signal that the US is getting stricter about the price cap, which was imposed in December 2022 by the Group of Seven (G7) countries and their allies. The stated objective of the price cap is to limit Russia’s oil revenue while keeping the international oil market adequately-supplied, and prevent supply and price shocks. Given that India takes delivery of nearly four dozen cargoes of Russian crude a month and a large number of tankers involved in Russian oil trade, the actual impact of the latest sanctions on Russian oil flows may be limited.

RIL and IOC did not respond to requests for comments on the matter till press time, while NEL said: “We would like to clarify that the oil tankers mentioned in the query are not scheduled to deliver any crude oil to Nayara Energy. Nayara Energy is an Indian company and remains committed to be strictly in compliance with all relevant and applicable regulations.”

According to industry sources, once the 45-day period is over, Indian refiners are likely to be unwilling to accept crude oil hauled on sanctioned tankers and Indian banks are unlikely to process payments for such cargoes. To be sure, Russian oil is bought by Indian refiners on a delivered basis, which means that freight and insurance are managed by the seller, and the Indian buyers pay the all-inclusive landed price of crude. Also, India is not a signatory to the price cap regime, and has even voiced its opposition to the cap being selective and aimed at specific buyers, given that it applies only to seaborne Russian crude and not on oil supplied through pipelines to other geographies.

Nevertheless, the government does not want Indian refiners to brazenly flout the G7 price cap or accept deliveries on sanctioned tankers in order to avoid secondary sanctions themselves, sources said. Over the past couple of months, there have been instances of tankers headed for India being sanctioned by the US for price cap evasion, leading to Indian refiners refusing to accept the cargoes.

But beyond that, the Indian government has maintained that buying discounted Russian crude has been in the interest of India’s energy security and should not be looked at from a geopolitical lens. In fact, Petroleum Minister Hardeep Singh Puri and External Affairs Minister S Jaishankar have even said that India’s purchase of large quantities of Russian crude brought balance and stability in the global energy markets and eased extreme price and supply volatility internationally.

Indian refiners ramped up Russian oil purchases in the aftermath of Moscow’s February 2022 invasion of Ukraine. As the West started weaning itself off Russian energy supplies, Russia began offering deep discounts on its crude oil, which Indian refiners began lapping up. Prior to the war in Ukraine, Russia was a marginal player in India’s oil imports, but is now New Delhi’s biggest source of crude. India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement.