India’s Russian oil imports flow heavy despite tighter sanctions

Tightening sanctions from the United States (US) and other Western powers on Russia’s oil trade appear to have had no impact so far on India’s Russian oil purchases, with delivered volumes in March rising over 6 per cent over February levels to a four-month high of nearly 1.7 million barrels per day (bpd), accounting for a third of New Delhi’s total oil imports for the month, as per preliminary data from commodity market analytics firm Kpler.

In the latest action against oil tankers over alleged violation of the G7 price cap of $60 per barrel on seaborne Russian crude, the US on February 23 sanctioned Russia’s state-owned shipping major Sovcomflot along with 14 tankers associated with it.

Indian refiners are now refusing to take delivery of crude transported by Sovcomflot tankers in an evident bid to steer clear of any secondary sanction risk. According to a senior government official, the government does not want Indian refiners to brazenly flout the G7 price cap or get involved in trades that might have sanctions-related risks.

This had led to considerable speculation that imports of Russian oil by Indian refiners could drop. The data for March, however, paints a contrarian picture.

The increase in volumes in March was led by abundant availability of Russia’s flagship Urals crude, which has been the mainstay of India’s oil imports from Moscow. Following drone attacks on Russian refining assets, around 400,000 bpd of Russia’s own refining capacity is offline, which means all that oil — mostly Urals — is making its way to the international market, said Viktor Katona, Kpler’s lead crude analyst.

Festive offer

“If one is to look at the Urals numbers alone, the 1.35 million bpd of Urals that Indian refiners bought in March is the highest since July 2023,” Katona said.
Importantly, the strong oil flows from Russia to India show that Russian oil exporters have been able to arrange tankers that are not sanctioned, and therefore, are welcome at Indian ports.

Russian oil is bought by Indian refiners on a delivered basis, which means that chartering of tankers and the associated procedures are the responsibility of the oil supplier. Indian buyers pay the all-inclusive landed price of crude and have no involvement in the shipping of the oil, which keeps them largely insulated from possible price cap-related complications. While a lot of crude deliveries on Sovcomflot tankers are now evidently shifting to China — the other big buyer of Russian crude — the massive so-called opaque fleet of tankers involved in Russian oil trade is likely to keep Moscow’s oil flowing to India. Broadly speaking, the opaque tanker fleet refers to vessels of unclear ownership involved in crude oil and petroleum products trade of suppliers under sanctions or restrictions of various degrees from international powers, particularly the US.

With major Western fleet operators loath to get involved in the oil trade of these countries, little-known operators from countries like Greece, Turkey, Russia, and tax havens like Marshall Islands, Liberia, and Panama have emerged as the key players in the so-called shadow fleet network. Additionally, ship-to-ship (STS) transfers of Russian oil are also picking up, particularly in waters off Oman’s coast. STS transfer refers to transfer of cargo between ships positioned alongside each other, either while stationary or underway.

“Indian buyers are buying their cargoes of Russian crude on a delivered basis, meaning they don’t have anything to do with the ship’s chartering and insurance … the Russian seller could just as well use a sanctioned shuttle tanker to bring the crude from the Russian port of loading, and then do a ship-to-ship transfer and then deliver the cargo to the Indian port aboard a non-sanctioned vessel,” Katona said, adding that more STS activity is expected in the coming weeks.

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 ahead of traditional heavyweights Iraq and Saudi Arabia.


 

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