The recent US sanctions on Russia threaten its oil sales to India, making it more difficult for Indian state refiners to secure annual supply deals with its largest seaborne crude oil supplier, three industry sources told Reuters.
On 23 February, which marked two years since Russia invaded Ukraine, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned almost 300 individuals and entities in response to the death of Russia’s opposition politician and activist Aleksey Navalny.
The OFAC has targeted Joint Stock Company Sovcomflot (Sovcomflot), Russia’s state-owned shipping company and fleet operator, to “reduce Russia’s revenue from oil sales”.
“We take the next step by targeting Russia’s largest state-owned shipping company and fleet operator, dealing a huge blow to their shadow operations,” Deputy Secretary of US Treasury Wally Adeyemo said in a press release. “We are entering the next phase of increasing Russia’s costs in a responsible manner to mitigate risks,” he added.
According to the US Government, Sovcomflot violated the G7’s price cap on Russian oil and 14 crude oil tankers related to the shipping company.
Recent US Government analysis said that the price at which Russia sells its oil has declined since the price cap was imposed, citing reduced global oil prices and discounts earned by Russia compared with other global oil suppliers. The data showed that the discount rose from around $12–13 per barrel of crude oil in October 2023 to almost $19 per barrel over the past month.
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“The price cap on Russian oil continues to serve its twin goals of limiting Kremlin profits while promoting stable energy markets,” Adeyemo said.
Indian refiners are worried that the most recent sanctions could create “challenges” to secure vessels for Russian oil, which could consequently lead to increased freight rates, Reuters reported. This development could potentially impact the discounted oil, normally purchased from traders and Russian companies on a delivered basis.
According to sources, the final volumes of the planned term deals rely on the payment terms and discounts offered by Russia, Reuters said. Additionally, two sources have revealed that Rosneft has offered a discount of $3–3.50 per barrel to Dubai prices, more expensive than Indian Oil’s current deal with Rosneft. Indian Oil’s deal will expire on 31 March, and it currently receives a discount of $8–9 to Dubai quotes on a cost and freight basis from Rosneft, the news agency said.
India took massive advantage of the discounted rates on Russian oil and has been among one of the largest consumers of Russian oil since the invasion of Ukraine. However, India’s imports of Russian crude oil fell for a second consecutive month in January, the lowest they have been in a year, due to tightened US sanctions.
