India’s love for Russian oil continues? State refiners pick non-sanctioned crude at higher discounts; but will Moscow remain top supplier?

With major Russian oil firms Rosneft and Lukoil being sanctioned, India’s state-run oil refiners are now picking up non-sanctioned crude - and that too at lucrative discounts! US President Donald Trump sanctioned the two Russian crude oil majors in October, and since then Indian refiners have been reducing their oil procurement from these entities.

However, since not all of Russia’s oil firms come under sanctions, India appears to have shifted focus to crude procurement from the non-sanctioned firms. According to a Bloomberg report, Indian Oil Corp. and Bharat Petroleum Corp. have taken Russian crude deliveries for January, attracted by substantial discounts and available supplies from non-sanctioned vendors.

Non-sanctioned Russian oil at discount

Sources quoted in the report said that the cargoes at approximately $5 per barrel below Dated Brent prices. This is a more favourable deal compared to the $3 per barrel discount that was available last month.

India's main refiner, IOC, has maintained its procurement of non-sanctioned Russian crude over several weeks, including deliveries in December. In contrast, BPCL abstained from Russian cargo acquisitions during this period.

According to sources quoted by Bloomberg, India's aggregate procurement is expected to remain below one-third of its typical volume for most of this year, staying under 600,000 barrels daily. Nayara Energy Ltd., a sanctioned refiner partially owned by Rosneft PJSC, traditionally accounts for more than 50% of these purchases.

After accounting for discounts and shipping expenses, Russian oil sales are expected to generate approximately $40-$45 per barrel, with payments conducted in UAE dirhams and US dollars, according to informed sources.

These crude oil purchases indicate a measured resumption of Russian oil imports by select Indian refiners, although spot market activity remains restricted as companies evaluate evolving sanctions.

Ongoing trade discussions between Washington and New Delhi continue, with oil shipments remaining a contentious issue. The Trump administration has consistently criticised India for its trade with Russia.

Key Russian oil companies - Rosneft, Lukoil PJSC, Surgutneftegaz and Gazprom Neft - have faced US blacklisting, leading to heightened bank scrutiny on transactions with Indian refiners. This is likely to reduce Russia's dominance as India's main crude supplier, creating opportunities for other major suppliers like Saudi Arabia to expand their market share.

Several Indian refineries maintain their distance from Russian crude, including Mangalore Refinery and Petrochemicals Ltd. and HPCL-Mittal Energy Ltd. Additionally, Reliance Industries announced in late November its decision to discontinue Russian oil processing at a section of its extensive Jamnagar refinery complex.

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