US sanctions loom, Russian oil loading for Indian ports halves

Russian oil discharged at Indian ports in the first 20 days of November averaged 1.89 million barrels per day (bpd), up from 1.62 million bpd in October, according to provisional data from global commodity data and analytics provider Kpler.

As for Russian oil loadings designated for India, the volumes fell to 0.98 million bpd in the November 1-20 period from 1.87 million bpd in October, and 1.75 million bpd in the January-September period.

The fall in loadings is driven by lower dispatches from Rosneft and Lukoil, which account for over half of Russia’s oil production and exports, and used to make up over two-thirds of India’s Russian oil imports.

The journey time for tankers transporting Russian crude to Indian ports could be up to four weeks, which means that much of the oil dispatched in November would arrive at Indian ports after the November 21 deadline. According to industry sources, this explains the crash in volumes as Indian refiners would want to steer clear of US-sanctioned oil cargoes.

The threat of secondary sanctions from the US is the reason why countries like India, while politically opposed to unilateral economic sanctions, usually steer clear of countries and other entities sanctioned by Washington.

While primary sanctions—on Rosneft and Lukoil, in this case—mainly curtail or prohibit the engagement of American citizens and entities with sanctioned entities, secondary sanctions seek to limit the engagement of other countries and their entities with the target country or entity.

Oil industry insiders said companies and banks are likely to exercise abundant caution to ensure they do not attract secondary sanctions.

Historically, India has avoided oil imports from countries like Iran and Venezuela, whose oil was sanctioned by the US, and industry watchers and experts expect a similar approach on oil from Rosneft and Lukoil. Given Indian refiners’ and banks’ exposure to the US—from dollar-denominated trade to access to the American financial system and markets—potential secondary sanctions could have a significant impact.

“After the (November 21) deadline, flows are likely to decline noticeably in the near term, because any cargoes after November 21 from Rosneft or Lukoil would carry significantly higher sanctions risk. Based on current understanding, no Indian refiner other than Nayara Energy’s already-sanctioned Vadinar facility is likely to take the risk of dealing with OFAC-designated entities, and buyers will need time to reconfigure contracts, routing, ownership structures, and payment channels,” said Sumit Ritolia, Lead Research Analyst, Refining & Modeling at Kpler.

The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions imposed by Washington.

“While volumes may still shift, as some in-transit vessels could revise their final destinations, the trend is clear: India-bound flows are softening. Loadings have already slowed since October 21, though it is still early for definitive conclusions given Russia’s agility in deploying intermediaries, shadow fleets, and workaround financing,” Ritolia said.

Following the announcement of the sanctions by Washington, refiner HPCL-Mittal Energy announced a suspension in Russian oil imports last month, while India’s largest refiner Indian Oil Corporation said it will comply with all sanctions imposed by the international community, but declined to comment directly on the future of the company’s Russian oil imports.

Reliance Industries (RIL), which accounts for around half of India’s Russian oil imports, said it was assessing the implications and compliance requirements following the sanctions, and will be “complying fully” with any guidance on the issue from the Indian government.

Given that other Russian oil exporters and intermediary traders dealing in Russian crude have not been sanctioned by Washington, some volumes of Russian oil could still find their way to India, as long as no sanctioned entity, vessel, bank, or service provider is involved.

But the oil volumes from non-sanctioned entities would be nowhere close to that seen over the past three years. Russia is currently India’s largest source of crude, accounting for over 35 per cent of India’s overall oil imports so far this year.

To offset the reduction in direct oil flows from Russia, Indian refiners are expected to increase oil purchases from West Asia, West Africa, Latin America, and North America. India is the world’s third-largest consumer of crude oil and depends on imports to meet around 88 per cent of its requirement.

According to Ritolia, Russian crude flows are entering a phase of heightened uncertainty and volatility as the supply chain adapts.

“In the longer term, the trajectory will depend on how strictly Western nations enforce secondary sanctions and whether further measures, such as sanctioning all Russian barrels or penalising refineries that process any Russian crude, are introduced,” he said.

“Tighter enforcement would suppress volumes further, while lighter-touch implementation could allow some recovery through intermediaries…Until refiners gain clarity on compliant pathways, including secure non-sanctioned counterparties, shipping and insurance availability, and workable banking solutions, India’s imports from Russia will remain in choppy waters, marked by short-term disruptions (lower arrivals) and frequent shifts in sourcing patterns,” he said.