Even as the impact of fresh sanctions by the US on Russia is not expected to disrupt the latter’s crude oil trade with India for next 6-8 weeks, the development is expected to have a bearing on the domestic refiners’ term deal negotiations with the Middle East.

A senior government official explained that tankers ferrying Russian crude oil to India that were chartered before January 10, 2024, and can off-load their cargoes at Indian ports by March 12 will not face any sanction fire.

“Market is still digesting what sanctions actually mean and is waiting for their impact. There will be disruption but not immediate. We have almost 6-8 weeks during which current cargoes will come in,” the official said.

‘Not anticipating shortage’

Last week, the US slapped sanctions on Russian crude oil producers Gazprom Neft and Surgutneftegas. Around 183 vessels that are involved in shipping Russian crude have also been sanctioned. It led to Brent prices surpassing $81 per barrel, the highest since August 2024.

Asked about the strategy going ahead, the official said that the trade is very lucrative for both the countries, and Russia during these 6-8 weeks will work on alternate arrangements.

“An oil shortage is not being anticipated. Enough spare capacity is there. OPEC has at least 3 million barrels per day (mb/d) sare capacity. Outside OPEC, Guyana, the US, Canada, Brazil and Suriname are in a position to increase supplies,” he added.

Besides, Indian refiners will soon start negotiations for term contracts with Middle East suppliers and can negotiate for more barrels.

On discounts, the official said that the “worse situation” will be that Russian discounts will not be there.

“Only thing that changes is how much one is paying for the supply, which is a function of two factors. First, how much potential discount is foregone and what is the overall crude price. If the overall price is low then I’m still okay, even if discounts are low. This $8,081 is knee jerk. I don’t think it will last for long,” he explained.

Noting that India would not deal with sanctioned entities, the official said that India does not deal with one of the companies in the sanction list, while the other (Gazprom) is not a “major supplier” but is a “significant supplier”. It will not have any major impact on India’s supplies.

“However, Vostok Oil company has been sanctioned and Indian oil and gas companies have a stake in it. Indian government is studying it and examining what impact it will have. Indian companies have a Participating Interest,” the official informed.

Published on January 13, 2025