US Sanctions Target Russia’s Oil Trade, Impacting India

Why in the news?

The US imposed sweeping sanctions on Russia’s oil trade, affecting tankers, companies, and insurance, potentially disrupting India’s crude oil imports. Russia remains India’s largest oil supplier, necessitating alternative arrangements amidst global market instability.

US Sanctions Target Russia's Oil Trade, Impacting India

About New Sanctions and Targets:

  • The outgoing US administration imposed significant sanctions on Russia’s oil trade, targeting 183 tankers, including the “shadow fleet” used to supply oil to India and China.
  • Sanctions also affected Russian oil companies, including Gazprom Neft and Surgutneftegas, along with insurance providers and related entities.
  • These measures are the most extensive since Russia’s invasion of Ukraine in February 2022.
  • Russia remains India’s largest crude oil supplier, accounting for 38% of its imports in 2024.

Potential Impact on India and Oil Imports

  • The sanctions may disrupt the availability of tankers, increasing freight costs and making oil from West Asian countries like Iraq, Saudi Arabia, and the UAE more competitive.
  • Indian refiners buy Russian oil on a “delivered basis,” insulating them from shipping-related complications.
  • Industry experts predict Russia might offer deeper discounts on crude oil to retain its market share in India and China.
  • Sources confirm that alternative oil supplies are sufficient to prevent major disruptions in India’s overall imports.

Future Developments and Uncertainty

  • The incoming US administration’s policy under Donald Trump remains uncertain, with intentions to broker peace between Russia and Ukraine.
  • Indian refiners will continue accepting sanctioned oil cargo booked before the January 10 announcement, with deliveries allowed until March 12.
  • The Kremlin has warned that these sanctions could destabilize global markets and pledged to minimize their impact.
  • Analysts expect Russia may rebuild its shadow fleet or reduce crude prices to comply with international shipping and insurance standards.
     

Sources Referred:

PIB, The Hindu, Indian Express, Hindustan Times