The United States announced a sweeping sanctions package targeting Russia’s oil trade on Friday (January 10), with 183 tankers — a sizable part of the so-called shadow fleet that has kept Russian oil flowing to major consumers such as India and China—being placed under sanctions. The outgoing Joe Biden administration in Washington has also sanctioned two oil Russian oil majors—Gazprom Neft and Surgutneftegas—and Russian insurance companies, among others involved in the Russian oil sector and trade.
These sanctions are the latest in the list of actions the Western powers have taken to curtail Russia’s revenue from oil exports, which they claim is helping Moscow fund its war in Ukraine. According to the US Department of the Treasury, the latest action substantially increases the sanctions risks associated with the Russian oil trade. A large number of the now sanctioned vessels have been delivering oil to India and China.

While these are still early days, the latest sanctions package—the largest to hit Russia’s oil shipping sector since Moscow’s February 2022 invasion of Ukraine—would certainly have an impact on India’s oil imports, given Russia is currently the biggest crude oil source market for India. How it would really pan out would be contingent upon various variables, including how Russia responds in terms of pricing and delivery of its oil.
In response to the latest US sanctions, the Kremlin reportedly said that the sanctions risked destabilising global markets, and Moscow would do everything possible to minimise their impact.
India-Russia oil trade: Impact likely after mid-March
According to sources in the Indian government, the country’s refiners will refuse oil deliveries on the sanctioned vessels, except for the cargoes booked before January 10, which can be delivered using these vessels till March 12. This wind-down period has been provided by the US to enable the existing contracts for Russian oil to be fulfilled.
While India itself is not part of the sanctions regime against Russia, like most other countries, New Delhi has generally followed a policy of not falling foul of US sanctions due to fear of secondary sanctions. Ship tracking data shows that a vast majority of oil tankers previously sanctioned by Washington have not been used since being designated, reflecting the general reluctance to flout US sanctions.
While the India-Russia oil trade is unlikely to be seriously impacted during this wind-down period, beyond that, industry insiders expect a hit to Russian oil supplies to India in the near term as a result of the sanctions. But it is unlikely to lead to disruptions in India’s overall oil imports as there is enough supply available from other oil exporting countries.
India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. From being a marginal oil supplier to India prior to the war in Ukraine, Russia is now India’s biggest supplier of crude, thanks to Moscow offering oil at significant discount after the West started shunning Russian oil. In 2024, Russian oil accounted for nearly 38 per cent of India’s total oil imports, per tanker data.
More oil imports from West Asia likely
As per data from commodity freight analytics firm Kpler, 102 of the recently sanctioned tankers transported Russian crude to either or both China and India at least once in 2024. According to a note by Kpler’s lead freight analyst Matt Wright, the newly sanctioned tankers handled over 530 million barrels of Russian crude exports last year. Of this, around 300 million barrels were shipped to China, and the bulk of the remaining exports went to India.
Now, Russia would want to rapidly increase the number of non-sanctioned tankers at its disposal to deliver its oil to India and China and mitigate the impact of the latest round of sanctions. Industry experts, however, point out that such a mammoth exercise would take a while.
“The swift sanctions aim to disrupt Russian oil exports, forcing sellers to seek alternative vessels to address the shipping shortfall—a challenge that will take time to resolve. Russian producers are expected to focus on securing non-sanctioned tankers to sustain crude flows, minimizing the impact on production,” Wright said.
Meanwhile, given the low availability of tankers for transporting Russian oil, its freight costs are expected to shoot up, which in turn will eat into the discount on Russian crude and make oil from other major suppliers—particularly those in the West Asia—more competitive, at least in the short term.
In the absence of meaningful discounts on Russian crude, Indian refiners are bound to gravitate towards its traditional suppliers like Iraq, Saudi Arabia, and the United Arab Emirates. In fact, Indian refiners have increased in the recent past their oil imports from West Asia as Russia cut back on exports due to seasonally high domestic demand in that country. Sources in the government and India’s refining sector indicate that ample supply is available from other major sources markets.
Notably, prior to the war in Ukraine, Iraq, Saudi Arabia, and the UAE were India’s top three source markets for crude oil. They are currently at the second, third, and fourth spot, respectively, in the list of India’s top oil suppliers.
Deeper discounts on Russian oil in the medium term?
The shadow fleet largely emerged as a result of the West’s price cap on Russian seaborne exports of oil, which prohibits use of Western shipping and insurance services—which enjoy a bulk of the global market share—if Russian oil exports are priced over $60 per barrel. The idea was to limit Russia’s revenue from oil exports.
To get around the price cap, Russia has been using the shadow fleet and its own insurance players. Technically, if Russian oil cargoes were not availing Western shipping or insurance, there was no way of forcing them to comply with the price cap. The latest sanctions come as a blow to this mechanism.
India is not a signatory to the price cap and Russian oil is bought by Indian refiners on a delivered basis, which means that chartering of tankers and the associated procedures are the responsibility of the oil supplier. Indian buyers pay the all-inclusive landed price of crude and have no involvement in the shipping of the oil, which keeps them insulated from possible price cap-related complications. But allowing sanctioned tankers to deliver crude at its ports is not palatable for India.
While Russia would be looking at rebuilding the shadow fleet, sources in India’s refining sector feel that the latest sanctions could force Moscow to actually price its crude under $60 per barrel in the medium term. This would then allow those cargoes to be shipped using Western shipping and insurance services. Sure, this would lead to lower revenues for Russia, but given that there aren’t enough buyers beyond India and China for its crude, Moscow might be forced to discount its oil to the extent that it complies with the price cap.
Discover the Benefits of Our Subscription!
Stay informed with access to our award-winning journalism.
Avoid misinformation with trusted, accurate reporting.
Make smarter decisions with insights that matter.
Choose your subscription package