India’s reliance on discounted Russian crude has necessitated a shift in supply chains following intensified US sanctions. Refiners are collaborating with merchants, shippers, and intermediaries to navigate the new restrictions targeting vessels and entities aiding Moscow.
The January sanctions, impacting approximately 160 tankers, have left Indian and Chinese buyers scrambling for alternatives. While February arrivals were largely unaffected due to a wind-down period, March shipments face significant disruptions. Estimates suggest state refiners and Reliance Industries are short 18 to 20 Russian crude cargoes for March loading, representing about 14% of India’s monthly imports. Efforts are underway to secure Russian supplies and avoid costlier replacements, but the tight timeframe poses a challenge.
Oil Secretary Pankaj Jain acknowledged the logistical hurdles, stating that solutions are being pursued to address sanctioned ships, insurance reconfiguration, and payment processing. A key challenge lies in the rapid emergence of new trading entities, making enforcement difficult. State refinery executives reported the appearance of new Dubai-based traders like L-Oil and Sccton, effectively replacing sanctioned firms like Black Pearl and Guron Trading. This rapid evolution of intermediaries, often operating as shell companies in Dubai and Hong Kong, allows for continued trade while circumventing sanctions.
Beyond new trading entities, Indian refiners are exploring alternative strategies. One method involves using onshore storage tanks in locations like Fujairah to obscure the origin of Russian oil. By reloading oil from these tanks onto new vessels and rebranding it as UAE-origin cargo, the sensitive shipment becomes more readily tradable. This tactic, mirroring strategies used by Chinese buyers to mask Iranian crude, offers a potential workaround, albeit with higher costs associated with onshore storage.
India’s Oil Minister, Hardeep Singh Puri, continues to advocate for discounts from Moscow while emphasizing India’s diverse sourcing options. However, the interdependence between Russia and India remains significant. Russia requires buyers beyond China, and Indian refiners face challenges returning to traditional Middle Eastern suppliers and negotiating favorable terms.
Russian First Deputy Energy Minister Pavel Sorokin underscored the global market’s reliance on Russian crude, asserting that replacement would come at a substantial cost. The ongoing situation highlights the complex interplay between geopolitical strategies, economic realities, and the adaptability of global supply chains. The outcome will significantly impact the energy landscape and the balance of power in the region.
