India’s Russian Oil Imports Defy Sanctions Squeeze as Discounts Widen to $7/Barrel

India’s intake of Russian crude oil is defying earlier forecasts of a collapse, with shipping data suggesting December arrivals could match or even exceed November’s record pace despite tightening U.S. sanctions.

The unexpected resilience underscores the deepening bifurcation in India’s refining sector. While private giants like Reliance Industries have paused purchases to protect their export exposure to Western markets, state-run refiners and Rosneft-backed Nayara Energy are accelerating purchases to capitalize on widening discounts.

Volumes hold steady

Data from energy intelligence firm Kpler indicates India imported approximately 1.85 million barrels per day (bpd) of Russian crude in November, surpassing initial estimates.

Preliminary tracking for December contradicts earlier market fears that flows would drop below 1 million bpd following the expiration of a U.S. wind-down license for dealings with Rosneft and Lukoil on November 21. Instead, arrivals are tracking toward 1.85 million bpd, driven by a rush to clear pre-deadline cargoes and the emergence of non-sanctioned intermediaries.

A divided market

The sanctions landscape has split India’s refiners into two camps:

• The Buyers: State-run Indian Oil Corp (IOC) continues to buy volumes comparable to pre-sanction levels, utilizing alternative payment channels. Nayara Energy, 49% owned by Rosneft, has become a dedicated outlet for Russian barrels, leveraging its domestic focus to bypass Western export compliance issues. Bharat Petroleum (BPCL) also remains active, aggressively booking cargoes for January.
• The Pausers: Private sector leader Reliance Industries has halted fresh Russian purchases for its export-oriented refineries to ensure compliance with Western norms. Similarly, Hindustan Petroleum (HPCL) and its joint venture HMEL have reportedly paused new deals to assess risk, contradicting earlier rumors of January bookings.

Widening discounts

The geopolitical risk premium is translating into deeper discounts for Indian buyers. Traders report that Urals crude for January loading is trading at a discount of 6-7 per barrel to Brent, significantly wider than the $3 discount seen in mid-2024.

“Price remains the ultimate arbiter,” noted an energy analyst in Mumbai. “For state refiners insulated from Western export markets, a $7 discount is too lucrative to ignore, especially when inflation management is a priority for New Delhi.”

Brief Summary

India’s Russian oil imports are tracking near 1.85 million bpd in December, defying predictions of a drop due to U.S. sanctions. The market has split: private refiners like Reliance have paused buying to protect exports, while state refiners and Nayara Energy are ramping up purchases to exploit discounts that have widened to $7 per barrel.

Frequently Asked Questions (FAQs)

Q1: Why haven’t Russian oil imports dropped?

Despite U.S. sanctions on Rosneft and Lukoil, Indian state refiners are using non-sanctioned intermediaries and alternative payment methods to keep oil flowing. The economic incentive—a $6-7 per barrel discount—outweighs the compliance headache for refiners focused on the domestic market.

Q2: Which companies are still buying?

Indian Oil Corp (IOC), Bharat Petroleum (BPCL), and Nayara Energy are the primary buyers. Nayara, partly owned by Rosneft, relies almost exclusively on Russian crude.

Q3: Who has stopped buying?

Reliance Industries, which exports fuel to Europe and the U.S., has paused fresh Russian purchases to avoid risking its access to Western markets. HPCL and HMEL have also reportedly hit pause to evaluate sanctions risks.

Q4: How big is the discount?

Russian crude is currently trading at a discount of 6-7 per barrel below Dated Brent. This is significantly better than the $3 discount seen earlier this year, making Russian oil highly attractive for Indian buyers.

Q5: Is this illegal?

No. India has not joined Western sanctions. As long as Indian companies do not use Western insurance or shipping services for trades above the price cap (or deal with specifically blocked entities without a license), they are not violating international law.