India’s top oil companies will start cutting back on purchases of Russian crude oil in the very near future after the US imposed sanctions on two top Russian oil giants Rosneft and Lukoil. The news about the US sanctions sent global oil prices shooting up in the last two days by $3 – or 5 per cent – to a peak of $66.02.
“The US has given companies time till November 21 to wind down their transactions with the Russian oil producers – according to the release on sanctions,” a Reliance spokesman told The Telegraph Online.
The company told London’s Financial Times earlier that it would adjust purchases based on advice given by the Indian government. “Recalibration of Russian oil imports is ongoing and Reliance will be fully aligned to Government of India guidelines,” the company said.
The rise in international oil rates will probably not impact Indian consumers very much because petrol prices at the pump have been almost unchanged for over two years even as crude oil fell from around $90 to $60 a few days ago.
The major oil giants like the private sector Reliance and the public sector’s star players like IndianOil Corporation and Bharat Petroleum have made huge profits by buying cheaper Russian crude. Energy Aspects, a London-based consultancy, told the FT that it reckoned that Reliance has had a “windfall of about $6 billion” by buying discounted Russian crude for three years.
The public sector oil companies have been buying Russian oil mostly on the spot market when they thought prices were right. Reliance, however, has a 10-year contract to buy 500,000 barrels a day of crude from Rosneft. But anyone who buys Russian crude after November 21 is likely to lose access to financing from US banks.
Till three years ago India got only 2 per cent to 3 per cent of its total oil needs from Russia because of higher transportation costs. In recent years after the Ukraine war broke out, India’s now getting up to 35 per cent and in some months 40 per cent of its oil needs from Russia.
The European Union (EU) and the UK are also toughening measures against Russia and latest moves target over 200 ships from what is called the “shadow fleet” which cannot access European ports and banks. The EU has now placed around 350 shadow fleet ships under sanctions.
Significantly, the EU will also be hurt by its own measures against buying Liquified Natural Gas (LNG). In the first half of 2025 the EU is estimated to have bought $5.22 billion worth of LNG. Announcing the squeeze on LNG purchases on X (formerly Twitter) European Commission President Ursula von der Leyen said: “For the first time we are hitting Russia’s gas sector – the heart of its war economy. We will not relent until the people of Ukraine have a just and lasting peace.”
Former US ambassador to India Eric Garcetti recently pointed out in an interview that the US under President Joe Biden had purposely allowed India to buy Russian to prevent global shortages that might have pushed prices up steeply.
It’s thought that President DonaldTrump is now taking a tougher stand because crude oil prices have fallen and he’s confident that squeezing the sales of Russian oil will not send prices shooting through the roof.
Also it’s thought that American oil producing companies would not want prices to fall much further because they have higher production costs of around $62 per barrel. Some of the major oil-producing countries like Saudi Arabia are also looking at raising production targets in 2026 and this has come at a time when demand is likely to fall.
Still oil prices can move in unpredictable ways and if prices climbed to $90 or $100 a barrel it would undoubtedly hurt the global economy badly. Prices have already risen by $3 in the last two days and they could continue to climb.
In the past two months Trump and his senior advisors like Peter Navarro and Scott Bessent have made several sharp attacks on India for purchasing Russian oil.
What will China do?
The Chinese government has also signalled that its state-owned refineries should stop buying seaborne Russian crude, the FT reported yesterday. It added though that smaller independent refineries may still continue seaborne imports. There are differing estimates of how much Russian oil reaches China via pipeline. Some analysts reckon that between 35 per cent and 40 per of Russian oil reaches through the pipeline. Other estimates put it as low as 10 per cent.
In the absence of Russian oil India is likely to return to its traditional Middle East suppliers like Iraq and Saudi Arabia. Iraq is still India’s second-largest supplier and Saudi Arabia the third – though Saudi oil has been more expensive for most of the year.
India is also buying smaller quantities from Kuwait and the UAE. However, one problem here is that the EU countries which traditionally bought large quantities from Russia have been buying from the Middle East ever since the Russia-Ukraine war began.