Trump takes action—India's daily supply of 1.6 million barrels of Russian oil is in jeopardy!
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The US Treasury Department has imposed sanctions on Rosneft and Lukoil, Russia's two largest oil companies, marking the first time the Trump administration has directly imposed economic costs on Russia over the Russia-Ukraine conflict. This measure threatens the energy supply chain between Russia and major Asian customers and will force major buyers like India to sharply reduce or even completely halt imports in the short term.
On October 23, according to media reports, the US Treasury announced sanctions on Wednesday, citing Russia's lack of a serious commitment to ending the Russia-Ukraine conflict. Treasury Secretary Besant stated that the US is prepared to take further action. The government has set November 21 as the deadline for clearing businesses, giving companies nearly a month to complete or cancel existing transactions with the two companies.
These sanctions directly impact Indian refiners. In September, India imported approximately 1.6 million barrels of crude oil per day from Russia, and Rosneft and Lukoil together account for about half of Russia's more than 4 million barrels per day of crude oil exports. Indian state-owned refiners Indian Oil, Bharat Petroleum, Hindustan Petroleum, as well as private giant Reliance Industries, all face the risk of supply disruptions.
According to a previous Wallstreetcn article, the latest sanctions mean that all four of Russia's major oil giants are now under US sanctions. Following the release of this news, market concerns about a possible disruption in Russian crude supply intensified, pushing international oil prices up by more than 4%.
Indian refiners face supply restructuring
Many Indian refining companies are directly exposed to Russian supply risks. According to Kpler data, Indian state-owned refiners Indian Oil, Bharat Petroleum, Hindustan Petroleum, as well as private companies Reliance Industries, HPCL-Mittal Energy Ltd., and Oil and Natural Gas Corp are all major buyers of Russian oil.
Media, citing informed sources, reported that Indian state-owned refiners are currently reviewing their Russian oil trade documents to confirm that no supplies come directly from Rosneft or Lukoil. Vortexa oil market analyst Emma Li stated that India may need to abandon its long-term seaborne agreements.
Rosneft also owns nearly 50% of Nayara Energy Ltd., which operates the Vadinar refinery in Gujarat state. This refinery may face difficulties in selling refined oil products, rather than obtaining crude oil.
Muyu Xu, senior crude analyst at Kpler, stated:
"This could be a very significant escalation. Trump's sanctions on Rosneft and Lukoil will have a major impact on Russian seaborne crude exports, potentially prompting major buyers to reduce purchases in the short term—if not completely stop them."
Amrita Sen, analyst at energy consultancy Energy Aspects, said this move would "further complicate Russian companies' oil exports." She believes the new sanctions may force Asian buyers to cut back on purchases of Russian oil.
Analysis points out that Russian oil giants shifted supply from Europe to Asia in 2022, but with this year's global energy price declines and US secondary tariffs on India's Russian oil purchases, their situation has deteriorated sharply.
The intensity of these sanctions far exceeds the previous price cap mechanism
These sanctions differ significantly from the previous G7 price cap mechanism. The price cap allowed Russian crude to flow as long as the price was below $60 per barrel.
John Kilduff, partner at Again Capital, pointed out: "This seems to mean that regardless of the price, you can't buy Russian crude oil. This is a comprehensive ban."
The sanctions mean buyers will need to find new shipping and payment methods, which will add extra costs and complexities. Bob McNally, president of Rapidan Energy Group, said this is exactly what the US wants: to reduce Moscow's profits without completely halting Russian exports.
Energy experts indicated that India will have no choice but to mainly turn to supplies from the US and OPEC.
Kilduff said: "OPEC currently has spare capacity, especially Saudi Arabia. But increased demand for non-sanctioned supplies worldwide will drive up prices." Vanda Insights founder Vandana Hari also said that India's alternative is more Middle Eastern crude.
Muyu Xu stated that she does not believe Russian crude flows will completely halt, but disruptions in the short term are inevitable.
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