Russia Moves to Bypass Sanctions to Keep Indian Oil Flows Intact

Russia is already reorganising its oil supply chains to bypass the latest US sanctions and ensure that India can continue importing large volumes of discounted Russian crude, according to industry analysts.Since the outbreak of the Ukraine war, India has emerged as the world’s second-largest buyer of Russian oil, benefiting from steep discounts created by Western sanctions. Russian crude has remained consistently cheaper than supplies from the Middle East, making it difficult for Indian refiners to move away despite mounting geopolitical pressure, said a Guardian report.Rising US Pressure on IndiaRelations between Washington and New Delhi have deteriorated in recent months as President Donald Trump has sought to force India to curb its reliance

on Russian oil, accusing it of indirectly financing Moscow’s war in Ukraine.In August, the US imposed a 25% tariff on Indian imports in response to continued Russian oil purchases. India pushed back, calling energy sourcing a sovereign matter and rejecting any external interference in its policy decisions. Trade talks between the two countries have since failed to deliver a breakthrough.Last week, the Trump administration escalated its stance further, threatening tariffs as high as 500% and warning of possible withdrawal from India-backed global initiatives if Russian oil imports continued.Sanctions Hit, But Only TemporarilyNew US sanctions introduced in late November targeted companies and refineries purchasing crude from Russia’s two largest exporters, Rosneft and Lukoil. The measures had an immediate effect, with India’s Russian oil imports falling from an average of about 1.7 million barrels per day to roughly 1.2 million barrels per day in December.However, analysts say the decline is unlikely to last. Despite the sanctions, four of India’s seven largest refineries continue to rely heavily on Russian crude, underscoring the depth of India’s energy dependence.Russia Reorganises Supply ChainsIndustry experts say Russia has already begun exploiting loopholes in the sanctions regime. As long as oil is supplied by exporters other than Rosneft or Lukoil, importing refineries are not directly exposed to US penalties.Export data shows several new Russian oil trading entities emerging in recent months, likely acting as intermediaries between major Russian producers and buyers in countries such as India.“It looks like new players are emerging, which suggests Russia is actively reorganising its supply chain,” said Homayoun Falakshahi, head of crude oil analysis at Kpler. “They are not going to sit back and watch the sanctions take effect — they will try to bypass them.”Falakshahi said it could take just two to three months for the supply chain to fully adjust, with most exports eventually routed through non-sanctioned entities.Indian Government Stays Hands-OffSo far, the Indian government has not issued formal instructions to refiners regarding Russian oil, instead urging companies to act in their commercial interests. During a visit to India in December, Russian President Vladimir Putin said oil shipments to India would remain “uninterrupted,” despite US pressure.For India, which imports about 90% of its crude oil needs, the economics are compelling. Following the sanctions, Russian oil discounts have widened further, making it $9–10 per barrel cheaper than supplies from Saudi Arabia or Iraq.“For companies willing to take the risk, the savings could be close to $4 billion annually,” Falakshahi said, adding that imports by state-run refiners are likely to rebound to earlier levels.June Goh, senior analyst at Sparta Commodities, echoed that view, noting that global markets appear unconvinced the sanctions will be strictly enforced. “The discount is simply too attractive,” she said. “That’s why oil prices have eased again after an initial spike.”Reliance Takes a Different PathOne notable exception is Reliance Industries, India’s largest private refiner and previously the biggest buyer of Russian crude. Since November, Reliance has stopped importing Russian oil into its Jamnagar refinery, marking January as its first month without any Russian crude.Analysts say the decision reflects not only US sanctions but also European Union rules that bar fuels refined from Russian-origin crude from entering EU markets. Since Europe is a major destination for Reliance’s diesel and jet fuel exports, compliance risks are high.As Reliance looks for alternatives, recent US actions in Venezuela may open a new route. Reports suggest the company is among firms in talks with Washington to resume purchases of Venezuelan oil under approved frameworks.In a statement, a Reliance spokesperson said the company would “consider buying the oil in a compliant manner.”