NEW DELHI: The United States’ sweeping sanctions targeting Russia’s oil sector are beginning to disrupt India’s energy supply chain, with state-owned Bharat Petroleum Corporation Ltd (BPCL) warning of a significant shortfall in Russian crude oil cargoes for March.
The US sanctions, announced on January 10, include a crackdown on Russian oil producers Gazprom Neft and Surgutneftegas, a blacklist of 183 vessels tied to Russian energy exports, and restrictions on oil traders, service providers, and insurers. These measures have hit India at a critical time, as refiners had begun negotiating for March shipments.
BPCL Director (Finance) Vetsa Ramakrishna Gupta revealed in an analyst call that while Russian oil had been secured for January and February, March supplies remain constrained.
The share of Russian crude in BPCL’s refining basket is expected to drop to 20 per cent in March, down from 31 per cent in the October-December quarter and 34-35% at the start of FY2024.
BPCL sets eyes on Middle East
“Though the market has sufficient alternatives, the loss of discounted Russian crude will impact cost dynamics,” Gupta noted, adding that BPCL plans to source more crude from the Middle East to make up for the shortfall.
India, once importing a negligible 0.2 per cent of its oil from Russia in FY2022, became Moscow’s second-largest buyer after the Ukraine invasion, leveraging steep discounts.
In 2024, Russian crude accounted for 40 per cent of India’s imports, averaging 1.7 million barrels per day. However, those discounts have now narrowed to $3-3.2 per barrel, compared with $ 8.5 in FY2023.
The latest sanctions have also targeted Russia’s “shadow fleet,” a network of tankers Russia used to bypass the G7’s $60 per barrel price cap. India has decided to ban deliveries by sanctioned vessels from docking at its ports after a wind-down period ending March 12. Existing contracts can only unload cargo before the deadline.
A senior government source stated, “There will be no immediate disruption for the first two months, but alternative arrangements will be essential moving forward.”
Oil prices spike
Global oil prices have spiked to $83-84 per barrel due to the sanctions, though Gupta expects them to stabilise at $75-80. He cautioned that in a worst-case scenario, discounted Russian crude may no longer be an option for India.
The G7 price cap and embargo, introduced in December 2022 to limit Moscow’s war revenues, initially caused Russia to lose 23 per cent of its monthly Urals crude export revenues.
However, the losses have since reduced to 9 per cent, with Russia finding new markets and deploying shadow fleets to trade oil above the price cap.
The sanctions now aim to dismantle these mechanisms, leaving India and other non-sanctioning nations scrambling to reassess their energy strategies.
