Trump tariffs on Russian oil put squeeze on India's biggest crude supplier

Trump Sanctions On Russian oil puts the squeeze on India's Biggest Crude Supplier

US President Donald Trump’s announcement of levying penalties on India’s purchase of Russian oil and arms, coupled with 25 per cent tariffs on Indian exports, may spell the beginning of the end of India’s import of Russian oil, accounting for nearly 45 per cent of the country’s total crude oil imports, if Trump carries forth with his threat, industry sources told Business Standard.

   

India bought 2.1 million barrels per day of Russian crude oil in June, according to Kpler’s ship tracking data accessed by Business Standard. The value of the imports from Russia in June was around $4.3 billion, according to calculations by Business Standard, based on European benchmark Brent prices, and prevailing discounts of $2.50-$3 per barrel on Russian oil.

   

The biggest impact is on private sector refiners Reliance Industries and Nayara Energy, which in June together accounted for 47 per cent of all Russian oil shipped to India, Kpler data shows. Reliance bought around 746,000 b/d of Russian oil, accounting for 53 per cent of oil processed at its 1.4 million bpd Jamnagar refineries in Gujarat. Over 60 per cent of crude processed at Nayara’s refinery in Vadinar was of Russian origin, according to calculations based on Kpler and oil ministry data.

   

“The potential impact of cutting off Russian oil from the international market would be a significant increase in international oil prices as Russian oil exports account for 7 per cent of the global liquids consumption,’’ said Prashant Vasisht, senior vice-president and co-group head, corporate ratings at Icra, a US Moody’s affiliate.

   

A $10/barrel increase in crude oil prices would increase the oil import bill by about $13-$14 billion, Vasisht said in an email to Business Standard, which in turn could lead to higher crude import bill and under recoveries on sale of liquefied petroleum gas, petrol and diesel for the oil marketing companies.

   

Marketing margins of Indian state oil companies averaged ₹5 per litre, according to a Mumbai-based brokerage.

   

“FICCI is disappointed by the decision taken by the US to levy a 25 per cent tariff on exports from India and impose secondary sanctions,” said Harsha Vardhan Agarwal, president, FICCI. “We hope that this imposition of higher tariffs will be a short-term phenomenon and that a permanent trade deal between the two sides will be finalised soon.”

   

Sanctions by America have come on the heels of stringent sanctions imposed by the European Union earlier this month on tankers delivering crude oil to India, on exports of fuels made from processing Russian crude oil and on Russian Rosneft-run Indian refiner Nayara Energy. The sanctions have forced Nayara to change the way it buys oil and sells fuels from its 400,000 b/d refinery in Vadinar on the west coast, industry sources said.

   

India started buying Russian crude oil after Russia invaded Ukraine in February 2022, cutting off Russian energy from western markets because of sanctions. That enabled India to buy Russian oil at discounts of over $15 per barrel off Dated Brent on a delivered basis in the beginning, but over time the discounts shrunk to around $4-$5 per barrel last year and are now at around $2.50 per barrel, according to refining sources.