Explained: The New US Sanctions Shock That Could Reshape India's Discounted Russian Oil Pipeline

India'a imports of Russian crude oil are expected to decline sharply over the next two months as new US sanctions on Moscow's major oil exporters take hold, though analysts say the flows will not stop entirely.Sanctions announced by Washington on Rosneft, Lukoil and their majority-owned subsidiaries came into effect on November 21, effectively rendering crude linked to these firms a "sanctioned molecule". India had accelerated purchases ahead of the deadline, lifting an estimated 1.8–1.9 million barrels per day (bpd) in November, compared with an average of 1.7 million bpd this year.But analysts expect arrivals to fall to around 400,000 bpd in December and January as refiners pause purchases linked to sanctioned entities.India, once largely

dependent on Middle Eastern oil, dramatically increased its intake of discounted Russian crude following the 2022 Ukraine invasion. Western sanctions and shrinking European demand pushed Russian barrels toward Asia, sending India’s share of Russian crude from less than 1 per cent to nearly 40 per cent of its total imports.“We expect a noticeable drop in Russian crude flows to India in the near term, particularly through December and January. Loadings have already slowed since October 21, though it is still early for definitive conclusions, given Russia's agility in deploying intermediaries, shadow fleets, and workaround financing,” said Sumit Ritolia, Lead Research Analyst for Refining & Modeling at Kpler.Several major Indian refiners, including Reliance Industries, HPCL-Mittal Energy Ltd and Mangalore Refinery and Petrochemicals Ltd, have temporarily halted Russian purchases linked to sanctioned firms. The only exception is Rosneft-backed Nayara Energy, which depends heavily on Russian crude after EU sanctions limited its access to other suppliers.“Based on the current understanding, no Indian refiner, other than Nayara's already-sanctioned Vadinar facility, is likely to take the risk of dealing with OFAC-designated entities, and buyers will need time to reconfigure contracts, routing, ownership structures, and payment channels,” Ritolia said.The sanctions do not apply to all Russian oil, only to specified companies. Crude from non-designated producers, including Surgutneftegaz, Gazprom Neft and independent traders using compliant intermediaries, can still be purchased legally, provided no restricted vessel, bank or service provider is involved.“Russian oil itself is not sanctioned; the suppliers are. That is why non-designated producers can legally step in to fill part of the gap created by the restrictions on Rosneft and Lukoil,” Ritolia noted.Reliance Industries, the world’s largest buyer of seaborne Russian crude, confirmed it stopped processing Russian barrels at its export-oriented Jamnagar SEZ refinery on November 20 to comply with upcoming EU rules banning fuels derived from Russian crude. From December 1, exports from the SEZ unit will rely solely on non-Russian crude.Ritolia said the long-term outlook depends on how aggressively Western nations enforce secondary sanctions. New intermediaries, alternative shipowners, evolving payment routes and increased sourcing from the Middle East, Latin America, West Africa and North America are likely to shape the new trade pattern.Despite disruptions, analysts say Russian barrels will continue reaching India. “Despite near-term declines, a complete halt to Russian imports is unlikely,” Ritolia said. "Despite near-term declines, a complete halt to Russian imports is unlikely. Discounted Russian barrels remain attractive for margins, and India's energy policy continues to prioritise affordability and security over geopolitical pressure. Unless secondary sanctions directly target Indian buyers or New Delhi imposes formal restrictions - both low-probability scenarios - Russian crude will keep flowing to India, though via increasingly diversified and less transparent channels," he added.(With PTI inputs)