US sanctions on Russia likely to cripple India's crude oil imports

Russian grades constituted around 39% of India's oil imports in May

A powerful senator in America has sponsored a Bill increasing sanctions on Russian crude oil after Russian President Vladimir Putin last weekend bombed Ukraine.

 

The Bill, if cleared, will cripple India’s import of Russian oil, according to industry officials and the ship-tracking data. 

 

New measures from America are “secondary sanctions”, like a 500 per cent tariff on countries buying Russian energy, targeting India and China. The proposed law endangers supplies of nearly two million barrels per day (bpd) of Russian crude oil, worth around $154 million, at the rates worked out in February, according to calculations by Business Standard based on the Indian Customs data.

 

On an annualised basis, India bought Russian crude oil worth around $50 billion in 2024-25. That’s around 35 per cent of India’s crude oil import bill, the Customs data show.

 

Democratic and Republican lawmakers are lobbying President Donald Trump to significantly increase sanctions, CNN has reported. “All of us, by our public statements as well as private contacts, are pressing very, very hard,” Democratic Senator Richard Blumenthal told CNN on Monday.

 

Blumenthal is backing a Senate Bill, supported by both Democrats and Republicans, including by Trump ally Senator Lindsey Graham, CNN reported. More than 80 senators have signed on to the Bill so far. Blumenthal said the Bill was drafted after “very extensive” consultations with Germany, France, and the United Kingdom (UK), which have recently imposed some tough sanctions on Russian vessels.

 

India does not recognise sanctions by the UK and the European Union. It does not recognise United States sanctions either but Indian banks and refiners are wary of Washington, Indian officials say. 

 

Russian oil was secured at a discount of $2-5 per barrel to European benchmark crude Brent on a delivered basis. In February, at $77 per barrel, Russia’s oil was the cheapest after Iraq’s on a delivered basis, and $5 a barrel cheaper than that from Saudi Arabia and that from the US, according to calculations based on the Customs data.

 

Russian oil shipments to India declined by around 3 per cent month-on-month in May at around 1.9 million barrels per day (bpd) and lower than the 1.97 million bpd a year earlier, according to the ship-tracking data accessed by Business Standard from market intelligence agency Kpler. That was still the second-highest this year and the highest since July last year barring April volumes.

 

Russian oil constituted around 39 per cent of Indian import in May followed by Iraq at 22 per cent. Supplies have bounced back by 27 per cent from February, when the US had imposed stringent sanctions.

 

Officials in the refining sector attributed strong Russian flows, which are expected to continue this year if there are no additional sanctions by Washington, to Russian oil trading below $60 a barrel free-on-board (FOB).

 

Suppliers are debarred from using Western shipping service and insurance when Russian oil trades at over $60 per barrel on an FOB basis, forcing them to use a so-called “dark fleet” of old, sanctioned vessels. 

 

State-run refiners and banks in India are wary of such transactions and incur resources and costs to check the trades.

 

But any trade below $60 per barrel on an FOB basis on Western vessels facilitates importing Russian oil, two state-run refiners said.

 

With Brent crude oil trading at around $65 per barrel, Russian Urals, a medium, sour grade suited to Indian refineries, is trading at around $50 per barrel on an FOB basis, Indian officials said. Urals constituted 70 per cent of Russian oil in May, the Kpler data showed.

 

Also, India has increased buying lighter and more premium grades of Russian oil like ESPO, Varandey, and Sokol because even these have dropped below $60 per barrel, according to Indian officials. These light, sweet grades made up 30 per cent of Russian supplies in May, displacing similar grades from the US, compared to just 22 per cent a year earlier, the Kpler data showed.

 

West Asian grades have taken the backseat. Iraq supplied around 1.08 million bpd. Typically medium, sour Basrah grades from Iraq have come in cheaper than those from Russia, with those supplied in February priced at $76 per barrel, a dollar cheaper per barrel than Russia’s. But Iraq has limited supplies for sale.