Indian Refiners Reconsider Russian Oil Purchases Following New US Sanctions Law

Indian oil refiners are reportedly exploring alternatives to Russian crude for November deliveries, a direct response to a new U.S. sanctions law that could penalize major buyers of Russian energy. The development threatens to alter a significant global energy trade route that has expanded since 2022.

New Sanctions Prompt Sourcing Review

According to a Bloomberg report citing people familiar with the matter, major Indian refiners have accelerated efforts to secure alternative cargoes in recent days. Their concern stems from a U.S. law enacted last week which grants the president the authority to impose tariffs, potentially as high as 100%, on goods from countries that are significant purchasers of Russian energy.

The law gives the U.S. administration a 30-day window to apply these tariffs. As the largest buyer of Russia's seaborne crude, India is a primary candidate for such measures. The report noted that Indian officials are also monitoring whether Washington will apply the sanctions broadly to other major buyers, such as China.

Impact on a Key Trade Relationship

India has become a crucial outlet for Russian oil, with imports expected to average approximately 1.9 million barrels per day (bpd) in September. This volume, while the lowest since April, still accounts for more than 35% of the nation's total crude imports, according to Kpler data cited by Bloomberg.

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Indian refiners would typically commence negotiations for November-loading Russian crude cargoes in the final week of September. A significant reduction in purchases would disrupt a major supply chain and force Russia to find other markets for its barrels.

The Search for Alternatives

Replacing the vast quantities of Russian crude presents a significant challenge for India, both in terms of volume and cost. Global crude markets are already tight, with Persian Gulf producers facing logistical challenges in the Strait of Hormuz.

Furthermore, alternative grades come at a higher price. At the end of last week, Russian Urals crude delivered to India was priced at about $133 a barrel, while Middle Eastern grades like Oman and Murban were several dollars more expensive, according to figures from Argus Media. This sourcing pressure comes as India's domestic crude demand is projected to hit a record 5.4 million bpd due to a new refinery and expansions at existing facilities.