The new U.S. sanctions imposed on Russia in reaction to the passing of opposition leader and anticorruption crusader Alexey Navalny are threatening India’s oil supply from Russia.
According to industry sources in India who spoke to Reuters, Indian refiners are worried that the most recent sanctions imposed by the United States against Russia may make it harder for them to obtain inexpensive Russian oil because freight costs are expected to rise and reduce their refining margins.
On the second anniversary of Russia’s invasion of Ukraine and in reaction to the passing of opposition leader and anticorruption crusader Alexey Navalny, the United States imposed more sanctions on the Russian Federation last week.
According to a report by Sputnik Globe-News, the US has defied its sanctions and imported Russian crude worth nearly $3.5 million in October and November.
The U.S. Treasury and State Department have designated 500 targets, including Russia’s tanker operator Sovcomflot and over a dozen crude oil vessels associated with the Russian state enterprise.
According to sources cited by Reuters, refiners in India are now worried that the new sanctions will make it harder for oil to be carried from Russia on non-sanctioned vessels, increasing transportation costs and reducing refining profits.
According to an Indian government source who spoke to Reuters, India would continue to purchase Russian oil, but only if it is delivered on non-sanctioned vessels and sold for less than the $60 per barrel G7 price cap.
Before the most recent U.S. sanctions, experts and traders told Bloomberg last week that the largest state-owned refiners in India were experiencing declining refining margins due to increased difficulty obtaining Russian oil and skyrocketing freight costs as a result of the Red Sea disruption to shipments.
For the majority of 2023, Indian refiners profited greatly from strong refining margins due to the importation of inexpensive Russian oil at $20 per barrel or less than international benchmarks.
The fall in refining margins can be attributed to greater expenses for Indian refiners as a result of increased rivalry for Russian supplies in Asia, higher freight costs, and stricter enforcement of U.S. sanctions, which have restricted India’s access to extremely cheap Russian crude.
Tankers that were originally destined for India are now turning back east, according to tanker-tracking data that Bloomberg tracked early this year. This is because of the more stringent implementation of the G7 sanctions and associated payment difficulties, which have been impeding Indian purchases of some cargoes of Russian crude oil.
