India building a sanctions-proof supply chain for Russian oil

Oil refiners in India — eager to keep importing cheap crude from Russia — are working with merchants, shippers and other middlemen to rebuild supply chains as tougher US sanctions come into effect. Speaking on the sidelines of India’s flagship energy gathering in Delhi, executives said the existing networks were being reconfigured with selling entities, tankers and insurance providers that are not on Washington’s blacklist. Some are existing outfits that have not been impacted by the punitive measures, while others are newly created, replacing those that are now off-limits, they said. The executives, all directly involved in the trade, asked not to be named as they are not allowed to speak publicly.

Since restrictions were first imposed, India’s heavyweight buyers, including Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Mangalore Refinery & Petrochemicals Ltd and Reliance Industries Ltd, have splurged on discounted Russian crude. Purchases went from a negligible portion of total imports to roughly a third. All that changed in January, however, when Washington rolled out a fresh salvo against vessels and entities assisting Moscow. 

“Imports need ships which are not sanctioned, insurance which takes time to reconfigure, and imports will need payments to go through. So each one of these has problems that need to be solved,” Oil Secretary Pankaj Jain said at the Delhi conference this week. “People are working on solving these problems,” he later added...It’s still unclear how the Trump administration will balance the eagerness to take a tough on stance on Russia and Iran and the desire to limit oil price increases and global disruption. Prime Minister Narendra Modi is due to meet the US President in Washington this week.

Indian Oil Minister Hardeep Singh Puri, speaking this week, reiterated his regular call for discounts from Moscow, and underlined that India had multiple crude sources and many options. Russia and India need each other, however, as Moscow needs buyers outside China, and Delhi’s buyers will struggle to go back go traditional suppliers in the Middle East and strike a hard bargain.

“No matter what pressure is exerted we will continue being in the market in a pragmatic way,” Russian First Deputy Energy Minister Pavel Sorokin told the conference, adding the market needed Russian crude. “There is no other oil or energy that can replace it without having the world incur a huge cost.”