Image credit: Bloomberg.
Indian oil refiners are actively rebuilding supply chains to continue importing cheap Russian crude as US sanctions tighten. They are working with merchants, shippers, and middlemen to reconfigure existing networks.
Executives at India’s flagship energy gathering in Delhi revealed that they are establishing new selling entities, using different tankers, and securing insurance providers that avoid US blacklists. Some are existing companies unaffected by sanctions, while others are newly formed.
India’s major buyers, including Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Mangalore Refinery & Petrochemicals Ltd, and Reliance Industries Ltd, significantly increased Russian crude purchases after initial sanctions. However, new US sanctions in January 2024, targeting nearly 160 tankers, disrupted these supply chains.
State refiners and Reliance are missing 18 to 20 Russian crude cargoes for March loading, equivalent to 20 million barrels or 14% of India’s monthly imports. They hope to replace these with Russian supplies to avoid more expensive alternatives.
Oil Secretary Pankaj Jain stated that the industry is working to resolve challenges related to sanctioned ships, insurance, and payments.
New trading entities like L-Oil and Sccton, based in Dubai, have emerged to offer Russian cargoes to Indian buyers, replacing sanctioned firms like Black Pearl, Guron Trading, and Demex Trading.
Dubai and Hong Kong have seen a surge in shell trading and shipping companies, facilitating Russian and Iranian oil trade. These companies are easily created and dissolved, making sanctions enforcement difficult.
Indian refiners are also considering using onshore storage tanks to disguise the origin of Russian oil. Oil discharged in Fujairah, for example, can be reloaded as UAE-origin cargo.
Ship-to-ship transfers are already used to mask Iranian crude by Chinese buyers. Onshore tanks are a less popular option due to higher costs.
Indian Oil Minister Hardeep Singh Puri reiterated the need for discounts from Moscow and emphasized India’s diverse crude sources.
Russia and India have a mutual need for each other, as Russia seeks buyers outside China and India benefits from discounted crude.
Russian First Deputy Energy Minister Pavel Sorokin stated that Russia will remain in the market and that Russian crude is essential to avoid global cost increases.