The US has imposed sanctions on two Russian oil companies, Rosneft and Lukoil. These are Russia’s two largest oil companies, and the sanctions are likely to hit Moscow’s economy. The Trump administration has accused these companies of funding Russia’s ongoing war in Ukraine. Meanwhile, the biggest question is what impact will US sanctions on these two major Russian oil companies have on India?
Impact on Russian economy
The new sanctions are likely to hit the Russian economy, as taxes from the oil and gas industries contribute about a quarter of Moscow’s budget. China and India are the largest buyers of Russian oil and energy. Last year, China bought a record 100 million tons of Russian crude, accounting for about 20 percent of Beijing’s total energy imports. Since Russia’s invasion of Ukraine in 2022, India has become the largest buyer of Russian crude oil. This year, India imported 17 lakh barrels of oil per day from Russia in nine months.
Government refineries are reviewing documents
According to a Reuters report, India’s government refineries are reviewing their Russian oil trade documents to ensure that India does not get oil supplies from these two Russian companies after the US sanctions were imposed. State-owned refineries including Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Mangalore Refinery and Petrochemicals are reviewing bill of lading documents for Russian crude.
What impact will US sanctions have on India?
The companies have not yet issued any statement on this matter. As it is, India’s government refineries do not buy Russian oil directly from Rosneft and Lukoil. India buys Russian crude oil through middlemen. According to a PTI report, US sanctions are likely to impact Reliance Industries’ crude imports from Russia, while government refineries may continue purchasing through middlemen for now.
Reliance Industries likely to be affected
According to reports, the government is assessing the risks of these sanctions, but it is unlikely to immediately stop the flow of Russian crude as it buys all its oil needs from traders, the majority of whom are European traders (who are outside the scope of the sanctions). Reliance Industries Ltd may have to rebalance its imports as it buys crude directly from Russia’s Rosneft.
In December 2024, Reliance signed a permanent agreement with Russian company Rosneft (which is now banned) to import 5,00,000 barrels of Russian oil per day for 25 years. It also buys oil from middlemen. The two companies banned by the US export 31 lakh barrels of oil per day. Rosneft alone exports six percent of global oil production and almost half of Russia’s total oil production.