Russia Assures India Of Uninterrupted Oil Supply Despite U.S. Sanctions

The latest round of U.S. sanctions on Russia’s oil sector has added pressure to its trade with India, but Moscow is confident that its oil trade with India will continue unaffected.

While Indian refiners are scrambling for alternative supplies, Russia’s First Deputy Energy Minister, Pavel Sorokin, has assured that the long-standing energy partnership between the two nations will remain intact.

Speaking at the India Energy Week conference, Sorokin said that Russia and India’s relationship is built on “economic pragmatism” and should not be influenced by political pressures. He also dismissed the sanctions as “illegal” and argued that they have negatively impacted the global economy.

India has been one of the largest buyers of Russian crude since Western nations imposed restrictions on Moscow after the invasion of Ukraine in 2022.

Russian oil, which was previously less than 1% of India’s total imports, surged to nearly 40% in 2022 due to heavy discounts. However, this share has now dropped to 30-35% as sanctions tighten.

The latest U.S. sanctions, announced last month, have targeted major Russian oil producers, including Gazprom Neft and Surgutneftgas, along with 183 vessels that have transported Russian crude.

As a result, tanker freight rates have spiked, and some buyers and ports in India and China have begun avoiding sanctioned ships.

For India, which imports over 80% of its crude needs, the tightening restrictions have created new challenges. Many refiners are now looking towards the Middle East to replace lost Russian volumes.

Meanwhile, state-owned banks have reportedly blocked payments for Russian crude, and discussions on long-term oil deals with Moscow have been put on hold.

The main reason behind India’s massive Russian oil purchases was the attractive price discount. However, these discounts have shrunk from $7-8 per barrel last year to just $2-3 per barrel.

In recent months, Russian oil shipments to India have already seen a decline. Imports in December and January fell compared to the previous six months.

Indian Oil Corporation (IOC), the country’s largest refiner, has acknowledged that it is facing a drop in Russian oil imports for the current fiscal year ending March 31 due to the U.S. sanctions.

Despite the sanctions, IOC has confirmed that it continues to buy Russian crude while ensuring no involvement of blacklisted entities.

India has received temporary relief from Washington, allowing sanctioned Russian tankers to unload crude at Indian ports until February 27.

However, uncertainty looms over what will happen after this deadline. Refiners are already scrambling to secure supplies for shipments arriving after this period.

Sorokin has insisted that it is too early to assess the full impact of the new sanctions, arguing that a few weeks of data is not enough to gauge long-term consequences.

However, he remains optimistic that constructive relationships will continue despite external pressures.

Sorokin reiterated that Russia has all the necessary technology and resources to maintain its oil production and fulfil commitments to its partners, including India.

He accused the sanctions of disrupting global energy markets, increasing the cost of capital, and depriving developing economies of billions of dollars.

Per the Centre for Research on Energy and Clean Air (CREA), India’s imports of Russian fossil fuels were valued at €3 billion, marking a 13% rise in volume. The organisation has warned that Russian oil imports into India are expected to drop as a result of the U.S. sanctions.

Sorokin remains firm that Russia will continue to work within market conditions. “We will continue to supply whatever energy is required by the global market despite the pressure being exerted on us,” he said.

References: Reuters, Oil Price

Source: Maritime Shipping News