India navigates between US sanctions and Russian oil dependence

Facing US secondary sanctions threats, Indian refiners slow Russian crude purchases while exploring costly alternatives, revealing complex energy security challenges.

Share:

Comprehensive energy news coverage, updated nonstop

Annual subscription

8.25€/month*

*billed annually at 99€/year for the first year then 149,00€/year ​

Unlimited access • Archives included • Professional invoice

OTHER ACCESS OPTIONS

Monthly subscription

Unlimited access • Archives included

5.2€/month*
then 14.90€ per month thereafter

FREE ACCOUNT

3 articles offered per month

FREE

*Prices are excluding VAT, which may vary depending on your location or professional status

Since 2021: 35,000 articles • 150+ analyses per week

Indian refiners are adopting a cautious approach regarding their import agreements with Russia, simultaneously intensifying efforts to further diversify their crude oil supply basket. This strategy comes as they await clearer signals regarding secondary sanctions threatened by US President Donald Trump, who has set an August 8 ultimatum for the Kremlin to agree to end the war in Ukraine.

New Delhi has given its refiners free rein to plan oil purchases with commercial viability in mind. Refiners now favor a delicate balance by increasing purchases from the United States and other non-OPEC suppliers. India has become the largest importer of Russian crude oil, with flows reaching 1.80 million barrels per day in 2024, surpassing China which imported 1.24 million barrels per day and Turkey with 0.3 million barrels per day.

Complex payment mechanisms reveal geopolitical tensions

Payment challenges constitute a crucial aspect not publicly discussed. India makes about 10% of its payments for Russian oil in Chinese yuan, with the remainder settled in Indian rupees and UAE dirhams. This complex configuration results from Russia’s exclusion from the SWIFT system, forcing both countries to explore alternatives such as the SPFS financial messaging system developed by the Russian central bank.

The issue of rupee accumulation in Indian banks poses a particular challenge. Billions of rupees remain blocked, with Moscow seeking ways to repatriate these funds, potentially by converting them to dirhams or yuan. This situation illustrates the limitations of a bilateral payment system when the trade deficit is imbalanced, with India importing massively more than it exports to Russia.

Flexible yet pressured refining infrastructure

Indian refining capacity, reaching 256.8 million metric tons per annum (MMTPA), offers remarkable technical flexibility. Indian refineries, notably Reliance Industries’ Jamnagar facility, have demonstrated their ability to process over 216 different grades of crude oil, theoretically allowing them to quickly adapt to new supply sources. This technical flexibility nevertheless remains limited by substantial economic considerations.

European Union sanctions on Nayara Energy and the possibility of additional sanctions from Washington have prompted Indian refiners to adopt a wait-and-see approach. Oil logistics disruptions persist at Nayara Energy’s terminal in Vadinar, with mainstream tanker operators becoming increasingly cautious about Russia-linked trades. Maritime traffic data shows relatively reduced vessel traffic at the terminal following the EU announcement.

Insufficient strategic reserves facing geopolitical risks

India’s Strategic Petroleum Reserves (SPR) reveal significant vulnerability. With a current capacity of only 5.33 million metric tons, these reserves cover just 9.5 days of national consumption, far from the 90 days recommended by the International Energy Agency. The 2025-26 budget has allocated 5,597 crore rupees for Phase II of the ISPRL project, aiming to add 6.5 MMT of additional capacity at Chandikhol and Padur.

This expansion remains insufficient given the challenge’s magnitude. Even with commercial stocks from oil companies adding 64.5 days of coverage, India would reach only 85 days of total reserves after Phase II completion. This situation considerably limits the country’s maneuvering room in the face of potential supply disruptions.

Potentially prohibitive substitution costs

The financial impact of abandoning Russian oil would be considerable. Analysts estimate that India’s annual oil import bill could increase by $9-11 billion if the country were forced to turn away from Russian crude. This increase would represent approximately 8% of the $137 billion total oil bill recorded last year.

Middle Eastern alternatives, notably Iraq and Saudi Arabia, offer little substantial price reductions. Iraq’s Basrah crude, at $76 per barrel, offers no significant savings compared to Brent, while Iraq’s limited spare capacity makes it an unreliable substitute for disrupted Russian volumes. West Asian exporters like Saudi Arabia and the UAE, once dominant players, have been marginalized by significant Russian oil discounts.

Indian refiners are cautiously exploring diversification, seeking volumes from Nigeria, Angola, and Brazil. These nations offer medium and heavy crudes suited to Indian refining configurations. Building reliable commercial ties and logistics frameworks with these suppliers takes time, a luxury India may not have if sanctions intensify rapidly. How this situation evolves will determine whether India can maintain its economic growth while navigating the geopolitical complexities of the global energy market.

Manila plans to expand gas and renewable energy production to meet a 6.6% increase in electricity demand over the next two years.
Ottawa and London increased bilateral exchanges to structure strategic cooperation on nuclear energy and critical minerals supply chains, as part of Canada’s G7 presidency.
Donald Trump says he secured Narendra Modi’s commitment to end Russian oil imports, adding political pressure to India-Russia trade relations.
Under intense diplomatic pressure from Washington, member states of the International Maritime Organization agreed to postpone by one year the adoption of a carbon pricing mechanism for global maritime transport.
Washington confirms it has mandated the CIA to carry out secret actions against Nicolas Maduro’s government, escalating tensions between the United States and Venezuela amid geostrategic and energy stakes.
Two European Parliament committees propose to advance the full halt of Russian hydrocarbon imports to 2026 and 2027, including oil, gas, and LNG, strengthening the European Union’s geopolitical position.
The COP30 conference hosted in the Amazon by Brazil faces low participation from global leaders, amid geopolitical tensions and major logistical challenges.
The United States has granted Trinidad and Tobago a special licence to resume negotiations with Venezuela on the Dragon gas field, partially lifting restrictions imposed on the Venezuelan energy sector.
Ambassadors of European Union member states have approved the transmission of a legislative proposal to phase out Russian fossil fuel imports by January 2028 to the Council of Ministers.
The State Duma has approved Russia’s formal withdrawal from a treaty signed with the United States on the elimination of military-grade plutonium, ending over two decades of strategic nuclear cooperation.
Polish Prime Minister Donald Tusk said it was not in Poland’s interest to extradite to Germany a Ukrainian citizen suspected of taking part in the explosions that damaged the Nord Stream gas pipelines in 2022.
Al-Harfi and SCLCO signed agreements with Syrian authorities to develop solar and wind capacity, amid an ongoing energy rapprochement between Riyadh and Damascus.
Faced with risks to Middle Eastern supply chains, Thai and Japanese refiners are turning to US crude, backed by tariff incentives and strategies aligned with ongoing bilateral trade discussions.
France intercepted a tanker linked to Russian exports, prompting Emmanuel Macron to call for a coordinated European response to hinder vessels bypassing oil sanctions.
The activation of the snapback mechanism reinstates all UN sanctions on Iran, directly affecting the defence, financial and maritime trade sectors.
Commissioner Dan Jørgensen visits Greenland to expand energy ties with the European Union, amid plans to double EU funding for the 2028–2034 period.
European and Iranian foreign ministers meet in New York to try to prevent the reinstatement of UN sanctions linked to Tehran’s nuclear programme.
Canadian Prime Minister Mark Carney announces a bilateral agreement with Mexico including targeted investments in energy corridors, logistics infrastructure and cross-border security.
The US president has called for an immediate end to Russian oil imports by NATO countries, denouncing a strategic contradiction as sanctions against Moscow are being considered.
Tehran withdrew a resolution denouncing attacks on its nuclear facilities, citing US pressure on IAEA members who feared suspension of Washington’s voluntary contributions.

All the latest energy news, all the time

Annual subscription

8.25€/month*

*billed annually at 99€/year for the first year then 149,00€/year ​

Unlimited access - Archives included - Pro invoice

Monthly subscription

Unlimited access • Archives included

5.2€/month*
then 14.90€ per month thereafter

*Prices shown are exclusive of VAT, which may vary according to your location or professional status.

Since 2021: 30,000 articles - +150 analyses/week.