India’s Shift Away from Russian Oil: Implications for Investors and Businesses in Oman
NEW DELHI: Indian refiners are poised to significantly reduce their imports of Russian crude oil in response to new U.S. sanctions targeting Rosneft and Lukoil, as reported by industry sources. This move could pave the way for a trade agreement with Washington.
Currently, India faces a 50% tariff on its exports to the United States, half of which is a countermeasure to its Russian oil purchases. Ongoing discussions may lead to a realignment of these tariffs with those imposed on other Asian countries if India scales back its imports of Russian crude.
Since Russia’s invasion of Ukraine in 2022, India has emerged as the largest purchaser of discounted seaborne Russian oil, averaging about 1.7 million barrels per day in the first nine months of 2023.
Reliance Industries, India’s leading buyer of Russian crude, is planning to decrease or potentially cease its purchases, according to two sources. A spokesperson for the company stated, “Recalibration of Russian oil imports is ongoing, and Reliance will fully align with the Government of India guidelines.”
State-owned refiners—Indian Oil, Bharat Petroleum, and Hindustan Petroleum—are reviewing their operations to ensure that no shipments are sourced directly from Rosneft or Lukoil in light of the sanctions. Both the oil ministry and the companies declined to comment immediately.
A refinery source noted, “There will be a massive cut. It won’t go to zero immediately, as some barrels may come through intermediaries.”
On Wednesday, U.S. President Donald Trump announced sanctions on Lukoil and Rosneft related to the situation in Ukraine, with the U.S. Treasury establishing a November 21 deadline to halt transactions with the sanctioned firms. An official from an Indian refinery indicated, “It all depends on the banks. If they process payments, we will continue buying; otherwise, my intake will be zero.”
Reliance, led by Mukesh Ambani, operates the world’s largest refining complex in Jamnagar and has a long-term agreement to purchase nearly 500,000 barrels per day from Rosneft, alongside additional acquisitions through intermediaries. Recently, the company has also secured spot cargoes from the Middle East and Brazil, as confirmed by traders.
Prior to the U.S. sanctions, Reliance was considering halting Russian crude purchases for one of its export-oriented refineries ahead of a European Union ban on products derived from Russian oil, set to take effect in January.
Nayara Energy, which is partly owned by Rosneft, also continues to buy Russian oil, while other state refiners typically source their crude through intermediaries. Following these developments, Brent crude prices surged by more than 3% on Thursday. — Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The sharp reduction in Indian imports of Russian crude due to new U.S. sanctions presents both challenges and opportunities for businesses in Oman. As India reassesses its oil supply sources, Oman could capture a larger market share of crude exports in the region, potentially benefitting from increased oil prices. Smart investors should consider exploring strategic partnerships with Omani oil producers to capitalize on potential supply chain shifts and meet rising global demand.
